Congestion charge & ULEZ

Conditions

1. The London congestion charge and the ULEZ charge are set by Transport for London, and clean air zone charges elsewhere in the UK are set by the relevant local authority — HMRC sets none of them. For the current daily amount and payment deadline, check the charging authority: in London, tfl.gov.uk/modes/driving/congestion-charge for the congestion charge and tfl.gov.uk/modes/driving/ultra-low-emission-zone/ulez-payments for ULEZ. The amount does not decide whether you can claim. For the congestion charge, the rules below turn on the purpose of the journey and on who was liable. For ULEZ and clean air zone charges this page gives no answer — see the condition on them below.
2. For a sole trader, HMRC states that the flat mileage rate does not include incidental expenses incurred in connection with a particular journey, such as tolls, congestion charges and parking fees, and that these will be allowable as a deduction where they are incurred solely for business purposes (BIM75005). For a trader working out actual car costs, HMRC says to allow the actual costs of any trade journeys (ie fuel, tolls, parking fees etc) (BIM37600).
3. For employees, GOV.UK lists congestion charges and tolls among the travel costs you can claim tax relief for (GOV.UK, updated October 2024), and HMRC states that travel costs can include toll fees, congestion charges, vehicle hire charges or car parking (EIM31820). Getting mileage allowance relief does not absorb them: relief is still permitted for the actual cost of expenses that would be incurred regardless of the mode of travel, which might include toll fees, congestion charges or car parking (EIM31820).
4. ULEZ and other clean air zone charges are a different charge from the congestion charge: HMRC's employer guidance says the charge is due 'If a motor vehicle exceeds certain emission standards', and covers it where an employer pays or reimburses it (EIM21680, below). For an employee's own vehicle on a business journey, it says relief may be available and points to EIM31820, which does not name these charges. None of the deduction passages above names them, and no HMRC guidance fetched for this page settles whether they can be claimed, so this page does not give an answer. It is worth asking an accountant.
5. The charge must relate to a business journey. HMRC states the cost of travelling between home and work includes the incidental costs of such a journey, including (for example) car parking and congestion charges, and that all such incidental costs are disallowable where the purpose (or one purpose) of the journey is to travel from home to place of work (BIM37605). For employees, GOV.UK says you cannot claim for travelling to and from work, unless you're travelling to a temporary place of work.
6. Where an employer pays the charge, HMRC states the treatment varies according to who was liable, or potentially liable. If the charge is incurred by a vehicle registered solely in the employer's name and the employer pays it (or reimburses the employee), there are no tax consequences for the employee. If it is incurred by a private vehicle registered in the employee's name and the employer pays it direct to the relevant authority, there is a tax charge under Section 62 ITEPA 2003 unless the payment is made in advance of the charge being incurred, in which case the payment is a benefit within Section 201 ITEPA 2003. Reimbursements are taxed as earnings or as expense payments, and relief may be available where the charge was incurred on a business journey (EIM21680).
7. Employees who pay congestion charges on qualifying business journeys can claim tax relief on the amount their employer has not paid. GOV.UK states that if your employer has paid some of your expenses, you can only claim tax relief on the amount they have not paid.
8. Paying late is not the same as not paying. HMRC states that if the charge is not paid by the specified time limit, a late payment surcharge is imposed, and that this additional amount is treated for tax in the same way as the basic charge, if the employer meets the cost or reimburses the employee for payment (EIM21680). That passage sits under HMRC's heading for a charge paid or reimbursed by an employer, so it answers the employee's position where the employer meets the cost; a penalty charge notice is a separate matter, below. For a sole trader's or a company's own deduction, no HMRC guidance fetched for this page says how a late payment surcharge is treated, or whether the bar on fines and penalty charges below reaches it, so this page does not give an answer. It is worth asking an accountant.
9. A penalty for not paying the charge is treated differently from the charge itself. GOV.UK lists fines or penalty charges among the costs a sole trader cannot claim, and HMRC states a fine incurred as a result of a trader's infraction of the law is not allowable (BIM42515). For employees, HMRC states that no relief is available for penalty charges, and where an employer pays a penalty the tax treatment for the employee again depends on whose name the vehicle is registered in (EIM21680). Whether an employer can deduct a penalty it pays turns on whose liability it was (BIM42515); take advice on a particular penalty.

Common mistakes

• Claiming a congestion charge incurred on the journey between home and your regular place of work. HMRC treats congestion charges as an incidental cost of that journey and disallows them (BIM37605).
• A limited company paying the charge direct for a car registered in a director's own name without treating it as earnings. HMRC states there is a tax charge under Section 62 ITEPA 2003 in that case (EIM21680).
• Assuming the flat mileage rate already covers the charge and leaving it out. HMRC states the mileage rate does not include tolls, congestion charges and parking fees (BIM75005).
• Attempting to claim a penalty charge notice for an unpaid charge. A sole trader cannot claim fines or penalty charges, and HMRC states no relief is available to an employee for penalty charges (EIM21680).

What to keep

• TfL or local authority charge records showing dates and amounts (TfL provides account statements for registered vehicles).
• A note of the business purpose of the journey on each date the charge was incurred.
• Where an employer pays or reimburses the charge, the registered keeper details for the vehicle, because HMRC's treatment turns on whose name it is registered in (EIM21680).

Real-world example

A self-employed architect drives into central London for a client presentation and incurs the congestion charge. The congestion charge is an allowable business travel cost (BIM75005). The same architect drives through the zone on the way to a co-working space they use as their regular base — HMRC treats the congestion charge on that journey as an incidental cost of travelling from home to place of work, and it is disallowable (BIM37605).

Frequently asked