London’s Ultra-Low Emission Zone (ULEZ) has undergone significant expansion, effective from Tuesday 29th August. This expansion has propelled it to become the most extensive pollution charging initiative worldwide. However, this move has sparked outrage among individuals grappling with financial strain due to the cost of living crisis.
The expansion of the ULEZ
Mayor Sadiq Khan, unwavering in his commitment, is driving the expansion of the ULEZ across Greater London. His rationale for this move lies in its potential to enhance the air quality of the British capital. Despite his noble intentions, this decision has encountered vehement opposition from the people living in these newly encompassed areas. Critics contend that the scheme is only about generating revenue and has nothing to do with the environment.
Although Sadiq Khan was urged by Labour leader Keir Starmer to reconsider or reverse his plans, Khan stood firm.
High Court challenge
Even a High Court challenge initiated by multiple outer London local authorities failed to halt the ULEZ’s expansion. London’s ULEZ shares similarities with low-emission zones implemented in over 200 cities across 10 European countries, all aimed at improving air quality.
Originally introduced in inner London during 2019, the ULEZ operates independently from the established congestion charge. It requires drivers of high-polluting vehicles to pay a fee of £12.50 for each day they drive. Failure to comply with this requirement results in fines of up to £180 per day.
This particular aspect has caused a lot of anger from opponents who state that public transport options in outer London are inadequate. They argue that imposing additional costs on drivers is unfair and ill-advised, due to the prevailing challenges of high inflation, escalating bills, and sluggish economic growth faced by the people of the UK.
Tax-deductible expenses
Despite all this, there’s a silver lining for sole traders and self-employed taxpayers: HMRC has said that ULEZ fees can be claimed as tax-deductible expenses when filing annual tax returns for business-related travel. So, workers with non-compliant vehicles can claim these fees if their journeys are exclusively for trade-related purposes.
The HMRC has stated, “Self Assessment customers are entitled to tax relief on travel expenses, including low emission zone charges, if they have been incurred wholly and exclusively for the purposes of the trade.” Whenever a self-employed individual claims an allowable expense, the full amount is subtracted from their taxable profits.
Self-employed?
For self-employed individuals, running a business incurs various costs, many of which are eligible for deduction when calculating taxable profits. These allowable expenses encompass a range of categories, such as office costs, travel expenses, clothing expenses, staff costs, purchases for resale, financial costs, business premises expenses, advertising or marketing expenses, and training courses pertinent to the business.
It is worth noting that ULEZ fees qualify as tax-deductible expenses for sole traders as long as the criteria are met. However, this claim cannot be made if one utilises the £1,000 tax-free ‘trading allowance.’
Furthermore, capital allowances can be claimed when purchasing assets for business use, such as equipment, machinery, and business vehicles (e.g., cars, vans, lorries). The method of claiming capital allowances varies depending on whether traditional or cash-basis accounting is employed.
Expenses incurred
In instances where an item serves both business and personal purposes, ULEZ fees remain tax-deductible for sole traders solely if the journey is “exclusively for the purposes of the trade.” Expenses incurred due to mixed business and personal use do not qualify for this deduction.
For those working from home, it is possible to claim a portion of costs related to heating, electricity, Council Tax, mortgage interest or rent, and internet/telephone usage. The calculation involves a reasonable division of expenses based on factors like the number of rooms used for business or the time spent working from home.
Simplified expenses provide an alternative to intricate calculations, offering flat rates for various categories, including vehicles, working from home, and residing on business premises.
Guidance and advice on ULEZ
For guidance and advice on ULEZ fees as tax-deductible expenses for your business, or assistance with business accounts and self-assessment tax returns, contact DabHand Accounting on 0203 161 8969.
