The UK Rules
Congestion Charges

Covering Congestion Charges for Employees

It is commonplace for employers to cover the costs of congestion charges for their employees. But, by doing so, you will have certain obligations for reporting, tax, and National Insurance.

Information in this section explains employer tax and reporting rules when covering congestion charge payments in the United Kingdom.

Employee Congestion Charges Explained

There are different rules for reporting tax and national Insurance on congestion charges to HM Revenue and Customs (HMRC).

As a general rule, it will depend on whether:

What Counts as Business Travel?

For HM Revenue and Customs purposes, travelling on business means the employee (either):

Important: When employers cover congestion charges for their employees they should count everything else as private travel. The main section explains more on PAYE expenses and benefits for employers and how to report and pay them.

Employee Congestion Charge Exemption

If an employee drives a company vehicle through a congestion charge zone there is no need for the employer to report or to pay anything to HMRC.

Salary Sacrifice Arrangements

The rules change if an employee drives a company vehicle for private purposes and it is part of a salary sacrifice arrangement. In this case, the employer must report employee congestion charges to HM Revenue and Customs (HMRC).

Reporting and Paying HMRC

You must report the pollution charges that are not exempt to HM Revenue and Customs. In some cases, you will need to deduct and pay tax and National Insurance on the charges. Use the amount paid in congestion charges as the value of the benefit.

In some cases, exemptions will cover certain types of congestion charges. So, employers do not need to include them in their end-of-year reports.

Note: Exemptions have now replaced dispensations. A different guide explains the new rules on exemptions and dispensations for expenses and benefits.

Employees Using their Own Vehicles for Business Travel

What if your employee uses their own vehicle to travel on business? In this case, you would need to report the cost on form P11D. But, you would not need to deduct or pay any tax or National Insurance on it.

Paying Employee Congestion Charges 'Directly' on Private Travel

What if, as an employer, you choose to pay for congestion charges 'directly' for the private travel made by your employees? In this case, you would need to:

Reimbursing Employee Congestion Charges on Private Travel

What if you choose to reimburse money paid out for pollution charges for private travel made by employees?. In fact, it would count as earnings, so you would need to:

Salary Sacrifice Arrangement Rules

The cost of the pollution charges may be less than the amount of salary given up by the employee. If so, you should report the salary amount instead.

These particular rules do not apply to employee salary arrangements made before the 6th of April 2017. HMRC produce guidance on how to set up salary sacrifice arrangements and then calculate tax and National Insurance contributions on them.

Note: You can read further technical guidance with extra detailed information in an HMRC internal manual titled 'Particular benefits: the congestion charge'.

Driving a Vehicle in London (LEZ) Zone

The aim of the Low Emission Zone (LEZ) is to encourage heavy diesel vehicles driven in the nation's capital to become cleaner. The LEZ operates 24 hours a day, every day, and covers most of Greater London.

The LEZ website shows whether you need to pay for driving a vehicle in Greater London and how to pay. There is no need to register to find out the fee for your vehicle (e.g. by registration number).

LEZ Vehicle Exemptions

The scheme provides an exemption for cars and for motorcycles. In fact, some types of light vans, historic, and specialist vehicles are also exempt from LEZ.

Vehicles You Need to Check

You can check the daily fee before driving a lorry, coach, bus, minibus, or service vehicle into the Greater London area. The charge also applies to certain types of specialist vehicles (e.g. driving a motorhome or motorised horsebox).


Covering Congestion Charges for Employees in United Kingdom

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