Expenses and benefits: congestion charges
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1. Overview
As an employer covering the costs of congestion charges for your employees, you have certain tax, National Insurance and reporting obligations.
Different rules apply depending on whether the employee used a company vehicle or their own car, and whether they were travelling on business or not.
Business travel
Travelling on business means that the employee either travels as part of their job (eg for meetings) or needs to go to a temporary workplace. Everything else is counted as private travel.
2. What's exempt
You don’t have to report or pay anything to HM Revenue and Customs (HMRC) if the employee is driving in a company vehicle.
Salary sacrifice arrangements
You do have to report charges if the employee is driving a company vehicle for private purpose as part of a salary sacrifice arrangement.
3. What to report and pay
If congestion charges aren’t exempt, you must report them to HM Revenue and Customs (HMRC), and may have to deduct and pay tax and National Insurance on them.
The value of the benefit to use is the amount you pay in congestion charges.
Some congestion charges are covered by exemptions (which have replaced dispensations). This means you won’t have to include them in your end-of-year reports.
If the employee is using their own vehicle to travel on business
You must report the cost on form P11D. You don’t have to deduct or pay any National Insurance or tax.
If you pay congestion charges directly for an employee’s private travel
You must:
- report the cost on form P11D
- deduct and pay Class 1 National Insurance (but not PAYE tax) through payroll
If you reimburse congestion charges for an employee’s private travel
This counts as earnings, so you must:
- add the value of the benefit to your employee’s other earnings
- deduct and pay Class 1 National Insurance and PAYE tax through payroll.
Salary sacrifice arrangements
If the cost of the charges is less than the amount of salary given up, report the salary amount instead.
These rules don’t apply to arrangements made before 6 April 2017 - check when the rules will change.
4. Technical guidance
The following guide contains more detailed information: