Understanding the Effects of ULEZ on Businesses
Posted on 6th September 2023
The Ultra Low Emission Zone (ULEZ) is a scheme to improve air quality in the UK, and has been in place in central London since April 2019. However, due to it's expansion to include outer London on the 29th of August 2023, ULEZ now covers all London boroughs and the City of London. This means that if you have a business operating within this new expanded zone, you need to be aware of how it may affect your operations and costs.
Understanding The Ultra Low Emissions Zone (ULEZ)
The expansion of the Ultra Low Emission Zone (ULEZ) from inner London aims to reduce air pollution in the city. This initiative specifically targets high-polluting vehicles and charges will be applicable 24/7 for those that do not meet the emissions standards. If you are unsure if your vehicle is compliant you are able to check on the government website at this link.
If your vehicle(s) are diesel and registered before 2016 or petrol and registered before 2006 then you may be liable to pay the daily charge of £12.50. These vehicles are targeted by the scheme as they produce more carbon dioxide, nitrogen dioxide, and fine particle matter which are the primary pollutants of London's air.
The Areas Covered by the Expanded ULEZ
The expanded ULEZ covers the entire Greater London area. This means that businesses operating in any London borough will be affected by the ULEZ expansion. Small businesses and sole traders will face the impact of this expansion, as it applies to all types of vehicles, including minibuses, motorcycles, and lorries. Checking the areas that are covered is important if your vehicle is liable for the emissions charge as it may cost you to even take your vehicle off your drive. You can check the scope of the zone and find out which postcodes fall inside the new boundaries here.
Impact of ULEZ Expansion on London's Businesses
ULEZ expansion will have a notable impact on businesses in and around London. Richard Burge, Chief Executive of the London Chamber of Commerce and Industry (LCCI) supports the scheme but expressed concerns that businesses may need more time to adapt and acquire compliant vehicles. Delays to getting new vehicles may mean some businesses have to pay the congestion charge for months until they get their hands on compliant vehicles.
Businesses who operate with non-compliant vehicles will be required to pay the ULEZ charge each day they enter the new zone, adding to their expenses. With this charge, as well as the congestion charge, operating a non compliant vehicle in London can quickly become expensive.
Businesses most likely to be affected include tradespeople, delivery services and caterers due to the frequency with which these businesses move around. Other sectors may also face higher costs as a result of suppliers passing on the charges, meaning that the effect of ULEZ on businesses is widespread and not only restricted to those using non-compliant vehicles.
How Can I Minimise the Impact of ULEZ Expansion?
To mitigate the impact of ULEZ expansion on businesses, there are several strategies that can be implemented. One effective strategy is to embrace electric vehicles, which are exempt from ULEZ charges and provide numerous tax advantages if you are looking to buy a company vehicle.
Advantages of Electric Vehicles
Electric vehicles offer numerous benefits to businesses, if the expansion of the ULEZ zone is a concern then they will ensure you do not have to pay the daily charge. Furthermore, electric company vehicles do offer the potential for substantial tax savings. The Class 1A NI contributions on an electric company car are 2% of the brand new list price (even if you bought it second hand) and fixed until 2024/25. This will rise to 3% from April 2025 and increase by 1% in future years. Comparatively, traditional petrol and diesel vehicles have a tax rate of up to 37% based on their emissions. This difference is important to bear in mind when looking at potential vehicles.
New Advisory Fuel Rates for Electric Vehicles
HMRC review the advisory fuel rates quarterly and on September the 1st 2023 raised the rates for electric cars to 10p per mile meaning that you will be able to claim more money back per mile driven in an electric car. Combined with the lower benefit in kind for electric cars means that they are a very good alternative to older diesel and petrol vehicles.
How Can an Accountant Help You With Your Vehicle?
If you are unsure about the best route to take regarding ULEZ or a potential shift towards electric vehicles then talking to an accountant may help you. An accountant who understands your business can assess your specific situation and offer tailored advice.
By talking to a tax expert, about buying an electric car, you can also ensure that you maximise the companies tax deductions and minimise your personal benefit in kind charge. Furthermore, a management accountant can help you decide on the best course of action to take if you are concerned about ULEZ impacting your business.
Talk to a Sherwin Currid accountant today to learn more.
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