ULEZ: How will it impact the self-employed?

Earlier this week the controversial ULEZ expansion was implemented. The change means that anyone driving certain vehicles – typically older ones – will now have to pay a daily charge when entering the newly restricted area. There is no doubt that a proportion of the self-employed that live in or close to the expansion zone will be negatively impacted by the change, but for once it seems that the taxman will soften the blow.

ULEZ will impact a significant proportion of the self-employed

There is approximately one million self-employed people living in Greater London. The UK has about 4.3 million in total, so London is very much at the epicenter of a population which is once again growing. If you factor in those who live in the south-east, the population rises to 40% of all self-employed. This concentration in and around London means the self-employed will be disproportionately impacted by ULEZ.

Furthermore, it is comparatively common for the self-employed to use a vehicle for their work – think gardeners, beauticians, tradesmen – and for those individuals to have to directly foot the bill of the new charge. Most employees on the other hand, will expect their employer to pay the charge if they have to use their vehicle for work, though they will most certainly be impacted if they commute to work by (the wrong sort of) car.

What vehicles have to pay the charge?

It’s important to note that most people drive cars, vans or trucks that are exempt from the charge.  It typically applies to diesel cars made before 2015 and petrol cars from before 2005. For vehicles that are not exempt, the charge is £12.50 per day and the fine for non-payment is a hefty £90 if paid within 14 days and an even-heftier £180 thereafter.

How does the ULEZ scrappage scheme work?

TfL has set up a scrappage scheme for non-exempt vehicles where the owners can claim grants. The amount of the grants vary but it’s £7000 to replace a non-compliant van. It’s not an insignificant amount of money, but the sole trader who is replacing their van will still have to invest their own money in most cases. And there have been reports that two-thirds of scrappage scheme claims have been rejected. The scheme has recently been expanded, so it may be that more applications will be accepted since that report.

How will the self-employed react?

Whether they like it or not, the self-employed that live, work and use a non-exempt vehicle to drive around in the ULEZ zone will be impacted. Their options are to change their vehicle, hoping the scrappage scheme will enable the upgrade; put up their rates (effectively passing the cost on to their customers); choose not to service those clients that live in the zone (assuming they themselves live outside the zone and have enough clients also outside the zone); or pay the charge and absorb the cost themselves. But that £12.50 daily charge will soon add up if they travel in the zone every day, or even a few days a week, and if they occasionally forget to pay it, the penalties are substantial.

What about tax relief?

There is, however, some good news. HMRC has confirmed the ULEZ charge can be off-set for tax purposes, providing the travel is ‘wholly and exclusively’ for work. So for those who choose, or feel forced, to absorb the cost, they will at least be able to deduct the charge from their profits on their self-assessment tax return. It’s not ideal. They will still be left shouldering the lion’s share of the charge and they are lumbered with the administrative burden of having to remember to do it, or face the big fines, but the tax relief will be some help.

ULEZ is highly controversial and politicised

The ULEZ charge has been mired in controversy, and it’s easy to see why. It will have a major impact on millions of people. Even the government opposes it – Rishi Sunak has said ‘they should not do it’ and by ‘they’ he of course means the Labour London Mayor and Labour Party more broadly, which support it. ULEZ affected the result of the recent Uxbridge by-election. There are even reports of vandalism to ULEZ cameras which Conservative MP Sir Iain Duncan-Smith has appeared to condone.

Despite the political furore, the sensible money is on the ULEZ expansion remaining in place for the foreseeable future. Those self-employed affected should consider their options on how best to deal with it now and take appropriate steps to minimize its impact.

More information on ULEZ is available here and you can check whether your vehicle is exempt here.