A guide to electric vehicle legislation and Ultra Low Emission Zones (ULEZ) in the UK

The government’s Road to Zero strategy, announced in July 2018, has established ambitious targets for new car and van sales, with ultra-low emission vehicles (ULEVs) set to change the face of our roads, homes, and the workplace, over the next ten years.  

This rapid transformation has been likened to the automotive revolution at the beginning of the twentieth century, where the motor car replaced the horse-drawn carriage.  

To bring about the exponential transition the government desires, it’s important for businesses to understand the national legislation and local activity that has been put in place to support our own automotive evolution – the road to ULEVs becoming ‘the norm’ across the UK.

How will national and local legislation affect fleets? 

We’ve considered the questions fleet managers may have about electric vehicle legislation in the UK and compiled answers explaining how national government initiatives affect fleets.  

In addition, we’ve provided a guide to local Ultra Low Emission Zone and Clean Air Zone developments. 

National CO2 and electric vehicle legislation FAQ

What is the government’s Road to Zero strategy and how does it affect fleets?

This government policy, released in July 2018, targets at least 50% – and as many as 70% – of new car sales to be ultra-low emission by 2030, as well as up to 40% of new vans.

Since 2009, the Office for Low Emission Vehicles (OLEV) has deemed an ultra-low emission vehicle (ULEV) to be a car or van that emits less than 75g/km of CO2.

Recognising advancements in technology, from 2021 it expects ULEV emissions to be defined as less than 50g/km.

To encourage businesses to choose ultra-low emission vehicles, the Road to Zero proposes a number of government incentives for electric vehicles, as well as the development of a charging infrastructure to enable vehicles, such as plug-in hybrid and electric cars and vans, to complete similar journeys to their petrol and diesel counterparts.

Has the government put in place Ultra Low Emission Zones (ULEZ) in cities outside of London?

Five major cities outside London have been given a mandate to deliver pollution reduction targets as part of the national Clean Air Zone strategy.

While London has chosen to call its Clean Air Zone the Ultra Low Emission Zone, other cities will use the name Clean Air Zone, but have similar emissions standards in place and will charge vehicles that do not meet these.

Birmingham, Leeds, Derby, Nottingham and Southampton are the first tranche required to implement action plans to reduce pollution levels through the development of similar congestion charges as those already in place in London’s Ultra Low Emission Zone. These are being developed at a local level and will require government approval.

See local Clear Air Zones (CAZ) below for more details.

Are there any grants or tax relief incentives for installing workplace charging points?

The government has confirmed it plans to extend the current 100% first-year allowance, for any expenditure incurred to install new and used electric vehicle charging points in the workplace, to 31 March 2023.

This is in addition to savings provided by the Workplace Charging Scheme. This business grant provides up to £350 per socket for up to 40 sockets, helping to reduce the cost of workplace charging points by up to £14,000 per applicant business.

What about the Plug-in Car and Plug-in Van grants?

The latest Plug-in Car Grant offers 35% of the vehicle purchase price up to a maximum of £1,500. This is available for cars with a list price below £32,000, zero tailpipe CO2 emissions and can travel at least 112km (70 miles) without any emissions at all.

The Plug-in Van Grant that offers 35% of the cost of a small electric van (<2.5 tonnes gross vehicle rate) up to a maximum of £2,500 and 35% of purchase price (maximum of £5,000) for large vans 2.5 -3.5 tonnes gross vehicle weight. You can claim a total of 1000 plug-in van and truck grants for your business or organisation each year. This limit resets every year on 1 April.

These grants directly impact whole-life costs, which makes plug-in hybrid and electric vehicles a valid consideration versus internal combustion engine (ICE) models.

NB: See more details of the available government incentives for electric cars and vans.

Our specialist advisors can help you establish whether, and how, electric vehicles could be a fit for your fleet, as well as help you make your EV business case.

Is there an advisory fuel rate for electric and hybrid cars?

There has been recent confirmation that the advisory fuel rate for pure electric cars is 5p per mile*. Plug-in hybrid and hybrid vehicles will continue to be treated as petrol or diesel models in terms of mileage reimbursement.

Both company car drivers and fleet managers need to be aware of this newly announced rate so drivers can consider any tax implications, and employers can ensure they are not paying more mileage expenses than are necessary.

*https://www.gov.uk/guidance/advisory-fuel-rates

What is the current lease rental restriction on vehicle CO2 emissions?

The current lease rental restriction has been reduced from 110g/km to 50g/km.

This means that any lease vehicles with emissions of 50g/km or less will not face a rental restriction, making the cost of the lease fully deductible against taxable profits.

For lease vehicles with emissions of more than 50g/km, businesses can only offset 85% of any rental payments against their taxable profits.

What are the latest announcements on the government’s ULEV taxation policy around benefit-in-kind (BiK) taxation, National Insurance contributions (NIC), Worldwide Harmonised Light Vehicle Testing (WLTP) figures, writing down allowances (WDA) and Vehicle Excise Duty (VED)?

BiK and NIC: CO2 emissions are the basis of our government’s taxation policy and are being used as a lever to encourage company car drivers and employers to consider plug-in vehicle options.

Current policy for BiK and NIC is known up to the 2024/25 tax year, with company EV drivers benefitting from 1% BiK rate in 2021/22 rising 1% in 2022/23 where it is then sustained at 2% until April 2025. Businesses benefit from a corresponding NIC perspective too.

In addition, ULEVs with CO2 emissions from 1-50g/km benefit from lower BiK rates too, but the specific rate will depend on its range in zero-emissions mode. Those registered from 6 April 2021 with an electric only range of more than 130 miles will benefit from a BiK rate of 1%, rising all the way up to 13% for those that can travel less than 30 miles.

NB: In addition to considering these savings as part of your EV fleet analysis, it’s important to make sure plug-in hybrid or electric vehicles are fit for purpose for both a driver’s job function and their lifestyle outside of work. Our Future Fleet Analysis and EV-4-ME? tools are designed to help fleet managers and drivers to evaluate EV viability.

WLTP figures: For cars registered from 6 April 2020 the CO2 values used for the taxation policy are WLTP. Cars registered prior to this date will continue to be taxed on their NEDC-correlated figures.

NB: Latest news on this will be posted on our WLTP guide and social media.

WDA: These heavily favour electric vehicles and ULEVs. Zero emission vehicles benefit from 100% first–year allowance.

Cars with CO2 emissions between 1 and 50g/km benefit from 18% per year and those with emissions above 51g/km attract a 6% writing down allowance.

Local Clean Air Zones (CAZ) 

What is the difference between a Clean Air Zone (CAZ) and an Ultra Low Emission Zone (ULEZ)?

A Clean Air Zone (CAZ) is an area where targeted action is taken to improve air quality, in particular by discouraging the most polluting vehicles from entering the zone. No vehicle is banned in the zone, but those that do not have clean enough engines will have to pay a daily charge if they travel within the area.

For example, the Government said Birmingham was required to reduce levels of NO2 in the air to a maximum average of 40μg/m3 as soon as possible. Birmingham has since launched its Clean Air Zone in June 2021.

As mentioned earlier in this guide, the five major cities outside London that have been identified to deliver pollution reduction targets as part of the national Clean Air Zone strategy are Birmingham, Leeds, Derby, Nottingham and Southampton.

At present, the only city that has named its Clean Air Zone ‘Ultra Low Emission Zone (ULEZ)’ is London. Other cities will continue to use the name ‘Clean Air Zone’. However, these will have similar emissions standards in place as the London ULEZ and charge vehicles that do not meet these.

London Congestion Charge Zone

First introduced in 2003, the London Congestion Charge Zone is one of the largest of its kind in the world.

Only battery electric or hydrogen fuel cell vehicles are eligible for the 100% cleaner vehicle discount. From 25 December 2025, the cleaner vehicle discount will be discontinued. From this date, all vehicle owners, unless in receipt of another discount or exemption, will need to pay to enter the Congestion Charge zone during charging hours.

The London Congestion Charge Zone operates 7am to 10pm, every day except Christmas Day. The daily charge is £15.

London Ultra Low Emission Zone (ULEZ)

As of 25 October 2021 the ULEZ expanded to create a single larger zone up to, but not including the North Circular Road (A406) and South Circular Road (A205), the London Ultra Low Emission Zone operates 24 hours a day, every day of the year except Christmas Day.

Charges of £12.50 per day apply to petrol cars and light commercial vehicles (LCVs) that do not meet the Euro 4 standard, as well as diesel cars and LCVs that do not meet Euro 6.

London borough of Hackney additional ultra-low emission measures across two zones

The London borough of Hackney has introduced two of its own Ultra Low Emission Zones. These cover five streets that only permit vehicles with CO2 emissions below 75g/km to enter. TFL operates the ULEZ 24 hours a day throughout the year.

Although these streets are already covered by the wider London ULEZ, the local measures are more stringent and will be applied to more streets in the borough when the London ULEZ is extended.

 

Birmingham Clean Air Zone (CAZ) plans

Charges have come into force for drivers entering Birmingham’s Clean Air Zone.

As of 1st June, Birmingham has officially launched its clean air zone meaning that charges of £8 per day will apply to petrol cars and LCVs that do not meet the Euro 4 standard, as well as diesel cars and LCVs that do not meet Euro 6. Certain exemptions apply to local businesses for a limited number of vehicles and a limited time.

Waseem Zaffar, Birmingham City Council’s cabinet member for transport and environment, said: “The Clean Air Zone will help us to address the single biggest environmental risk to public health, and I have been clear from the beginning of the scheme that we wanted to make its introduction fair and reasonable.”

About 75% of cars will not be subject to the charge, but Mr Zaffar urged drivers to check their vehicles online before travelling.

*comment courtesy of bbc.co.uk 14th June 2021

Leeds Clean Air Zone (CAZ) plans
The Leeds Clean Air Zone, originally announced in 2018, has been scrapped as pollution has improved much faster than expected.
Derby Clean Air Zone (CAZ) plans

Derby council plans to introduce traffic control measures that it believes will achieve the necessary reductions in pollution levels within the first twelve months. The council currently does not plan to introduce a charging Clean Air Zone.

Nottingham Clean Air Zone (CAZ) plans

Rather than introduce a charging Clean Air Zone, Nottingham is focusing on updating its bus fleet through a retrofit programme and addressing emissions from older taxis.

The city will also receive funding support to update its own vehicle fleet with cleaner alternatives, including its waste collection vehicles. The council’s plan has been approved by Defra.

Southampton Clean Air Zone (CAZ) plans

Southampton has determined that it will focus efforts on the most polluting taxis and buses in the city, rather than introduce a Clean Air Zone. These measures will enable Southampton to reach its pollution reduction target by 2020.

Clean Air Zone plans for other parts of the UK

In addition to the five cities above, several districts and other cities across the UK are progressing with plans for their own pollution reduction schemes, some of which include Clean Air Zones.

Other measures being investigated include:

  • limiting access to certain areas by time/fuel type/emissions
  • differentiated parking costs.

In all of the above instances, electric cars and vans are the least likely vehicles to be affected.

The VWFS | Fleet EVolve team is best placed to help you to introduce electric vehicles to your fleet.

Need more EV information?

Now you’ve had a chance to digest how national and local electric vehicle legislation might affect or benefit your business, why not speak to one of our expert EV advisors? Alternatively, our range of free tools and guidance is designed to help you analyse your fleet for EV viability. 

Sources:

Van VED | Car BiK rates | BiK frozen rates