ULEZ Fees: Tax-deductible Expense for Sole Traders
02/09/2023 - 5 minutes readULEZ fees are a tax-deductible expense for sole traders and self-employed taxpayers when they submit annual tax returns for business-related journeys.
ULEZ fees are a tax-deductible expense for sole traders as confirmed by HMRC that workers with non-compliant vehicles can claim if their journey was “exclusively for the purposes of the trade“.
In a statement, HMRC said: “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.”
When a self-employed individual claims an allowable expense, the amount is deducted fully from their taxable profits.”
If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they’re allowable expenses.
Allowable expenses do not include money taken from your business to pay for private purchases.
Costs you can claim as allowable expenses
These include:
- – office costs, for example, stationery or phone bills
- – travel costs, for example, fuel, parking, train or bus fares
- – clothing expenses, for example, uniforms
- – staff costs, for example, salaries or subcontractor costs
- – things you buy to sell on, for example, stock or raw materials
- – financial costs, for example, insurance or bank charges
- – costs of your business premises, for example, heating, lighting, business rates
- – advertising or marketing, for example, website costs
- – training courses related to your business, for example, refresher courses
ULEZ fees are a tax-deductible expense for sole traders if you claim allowable expenses as per above.
You cannot claim expenses if you use your £1,000 tax-free ‘trading allowance’.
Costs you can claim as capital allowances
If you use traditional accounting, claim capital allowances when you buy something you keep to use in your business, for example:
- – equipment
- – machinery
- – business vehicles, for example, cars, vans, lorries
If you use a cash basis
If you use cash-basis accounting and buy a car for your business, you can claim this as a capital allowance. However, all other items you buy and keep for your business should be claimed as allowable expenses in the normal way. ULEZ fees are a tax-deductible expense for sole traders using the cash basis.
If you use something for both business and personal reasons
ULEZ fees are a tax-deductible expense for sole traders if your journey was “exclusively for the purposes of the trade”. You cannot claim the ULEZ fee as an expense if it was for both business and personal reasons.
If you work from home
You may be able to claim a proportion of your costs for things like:
- – heating
- – electricity
- – Council Tax
- – mortgage interest or rent
- – Internet and telephone use
You’ll need to find a reasonable method of dividing your costs, for example by the number of rooms you use for business or the amount of time you spend working from home.
Example: You have 4 rooms in your home, one of which you use only as an office.
Your electricity bill for the year is £400. Assuming all the rooms in your home use equal amounts of electricity, you can claim £100 as allowable expenses (£400 divided by 4).
If you worked only one day a week from home, you could claim £14.29 as allowable expenses (£100 divided by 7).
Simplified expenses
You can avoid using complex calculations to work out your business expenses by using simplified expenses. Simplified expenses are flat rates that can be used for:
- – vehicles
- – working from home
- – living on your business premises
How can MCL Accountants help?
Contact MCL Accountants on 01702 593 029 if you have any queries on whether ULEZ fees are a tax-deductible expense for sole traders or if you need any assistance with the preparation and submission of your business accounts and self-assessment tax returns to HMRC.
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Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.
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