Small businesses can’t afford Sadiq Khan’s congestion charge tax grab

28 May 2025, 15:15 | Updated: 29 May 2025, 07:34

By Matthew Jaffa

For many small firms in London, using a vehicle inside the Congestion Charge zone isn’t a choice – it’s a necessity.

From tradespeople to couriers to care workers, for many business owners and self-employed people, a car or van is an indispensable part of their daily routine.

The proposed 20 per cent Congestion Charge increase by the Mayor and TfL is a lot, at a time when small firms are already having to make extremely tough business decisions to remain competitive. Many businesses, particularly those in sectors where margins are already tight, will not be able to absorb these extra costs. There’s a good chance that businesses will have to look to charge customers a premium for their business services, which will further heighten inflationary pressures.

At the Federation of Small Businesses (FSB), we have long called for the 100 per cent Cleaner Vehicle Discount for electric vans to remain in place. The Mayor and TfL are proposing to make electric van drivers pay £9 a day, up from nothing at present – a bitter pill for a small business to swallow. We urge the Mayor to maintain a zero charge for small businesses which use electric vans.

Ending the current Congestion Charge exemption for all electric vehicles on Christmas Day this year will be a very unwelcome present for small business owners who are trying to reduce their carbon footprint by switching to a zero emission vehicle.

The higher upfront costs for new electric vehicles and the uncertain residual values for second-hand electric cars and vans already put them out of the financial reach of many small businesses. Still, the lower charges they are subject to in congestion or clean air zones act as a strong argument in their favour. Significantly reducing this benefit will de-incentivise small business fleets which would otherwise have given serious consideration to swapping over to a greener vehicle.

Surface transport makes up nearly a quarter of UK emissions, with cars alone accounting for just under three-fifths of that amount. With nearly two-thirds of small firms keen for the Government to place a high priority on sustainability, according to FSB’s newly-published report, New Growth: How to support small businesses to cut carbon and costs on the road to Net Zero, taking away some of the rationale for making the switch to a zero emission fleet will be highly counterproductive to the Government’s stated goal of reaching net zero by 2050, with the sale of most petrol and diesel vehicles to be phased out by 2035 – only 10 years away.

The Mayor should immediately reconsider the excessive increase and the removal of the 100 per cent Cleaner Vehicle Discount, and make the proposals more palatable to struggling small firms. Now is not the time to punish small firms that were thinking of moving to an electric vehicle, or who have already done the right thing.