Scrappage scheme – what do businesses need to know?

As the Ultra Low Emission Zone (ULEZ) expands and more clean air zones are introduced across the country, businesses are being given the opportunity to scrap high-polluting vehicles.

Read on to find out how the ULEZ scrappage scheme works, plus whether you should scrap your van or commercial vehicle.

What is the scrappage scheme?

From 29 August 2023, the ULEZ scheme is expanding to cover everything within the Greater London Authority boundary.

As a result, the Mayor of London announced a £110 million scrappage scheme (increased to £160 million in August 2023) to help people with high-polluting vehicles.

Drivers can use the scheme, which was launched in January 2023, to access grants to scrap or retrofit their vehicles.

Small businesses can use the scheme to make commercial vehicles compliant or replace them altogether.

Who is eligible for the scrappage scheme?

All Londoners with a non-compliant vehicle will be able to access money to replace it through the scrappage scheme.

The scheme is open to small businesses and sole traders operating in the 32 London boroughs. It’s also available to people on low income or disability benefits, or those receiving Child Benefit.

There isn’t currently a national scrappage scheme if you’re not based in London.

Eligible vehicles will need to have been registered to you (or someone who lives at your address) since 30 January 2022 or earlier.

To receive a scrappage grant, the vehicle must also have valid:

• insurance
• road tax
• MOT

What types of businesses can use the scrappage scheme?

After its expansion in August, the scrappage is available to:

• small businesses with under 50 employees and up to £10.2 million turnover or a balance sheet total of up to £5.1 million
• microbusinesses with 10 or fewer employees and up to £632,000 or £316,000 on the balance sheet
• sole traders or charities registered with the Charities Commission

All organisations operate within London’s 32 boroughs, while small businesses and micro businesses need to be registered with Companies House as an active company or VAT registered.

How do you apply for the scrappage scheme?

TFL has more information on how to apply, including the grants available and documents you’ll need. You’ll need to apply online with specific ID and evidence.

Once you’ve applied online, you’ll be assessed for eligibility.

What are the scrappage scheme rates?

Small businesses, micro-businesses, sole traders, and charities can access the scrappage scheme grant.

If your business is based in London and you currently drive a vehicle that doesn’t meet the emissions standards, grants are available if you want to scrap or retrofit your business van.

Grants available for businesses scrapping these vehicles:

• up to £7,000 to scrap a van
• up to £9,000 to scrap a minibus
• up to £6,000 to retrofit a van or minibus
• up to £9,500 to scrap a van and replace it with an electric van
• up to £11,500 to scrap a minibus and replace it with an electric minibus
• up to £2,000 to scrap a car
• up to £1,000 to scrap a motorcycle

Small businesses and sole traders with fewer than 50 employees can scrap up to three vans

or minibuses.

If you’ve ordered a new vehicle or retrofit but it won’t be ready in time for the ULEZ expansion in August, there’s a grace period until the end of February 2024.

It’s also important to note that the scrappage scheme is first-come first-served, so the sooner you apply for a grant the more likely you are to get one.

Is my business van eligible for the scrappage scheme?

If you want to scrap your business van using the scheme, it’ll need to be:

• a light van, up to 3.5 tonnes gross vehicle weight (GVW) or minibus (up to five tonnes GVW)
• registered to an eligible organisation for more than 12 months before January 2023
• registered in the name of the business, sole trader, or charity (if the vehicle’s registered to an employee, director of the business, or a charity trustee, you’ll need to provide evidence of their link to the organisation

To scrap a commercial van, it’ll also need to be:

• insured for business use
• ULEZ non-compliant (including pre-Euro 6 diesel vehicles and pre-Euro 4 petrol vehicles)

Replacing your van with an electric vehicle

If you want to scrap your non-compliant van and replace it with an electric vehicle, the new van will need to be:

• a fully electric light van (up to 3.5 tonnes GVW) or a fully electric minibus (up to five tonnes GVW)
• bought outright or on a lease contract that is at least two years long
• the same body type as the van you scrapped

Retrofitting your existing commercial vehicle

If you choose to retrofit your non-compliant van, the vehicle will need to be:

• a light van (up to 3.5 tonnes GVW) or minibus (up to five tonnes GVW)
• registered to an eligible organisation for more than 12 months before January 2023
• registered in the name of the business, sole trader, or charity (if the vehicle’s registered to an employee, director of the business, or a charity trustee, you’ll need to provide evidence of their link to the organisation
• on the Clean Vehicle Retrofit Accreditation Scheme (CVRAS) register (if your vehicle’s make and model isn’t on this list, it won’t be eligible for retrofitting)
• retrofitted by a CVRAS-approved company with an approved emissions reduction system

How many businesses have used the scrappage scheme?

By June 2023 the ULEZ scrappage scheme had already received almost 7,000 applications, resulting in over £25 million in grants handed out by the government.

Of these applications over half were made by van and minibus drivers, including 2,000 from sole traders and 1,800 from microbusinesses.

The scrappage scheme was expanded in August, with the Mayor of London adding an extra £50 million in cash reserves to the original £110 million.

Are there other scrappage schemes available?

If your business isn’t based in London, you won’t be eligible for the ULEZ scrappage scheme. However, some vehicle manufacturers are offering alternatives.

Renault has a ‘new for old’ scheme’, which has van exchange allowances for up to £9,500.

And Peugeot offers a scrappage discount for all petrol and diesel-powered vans and cars registered before December 2010.

Should I scrap my van?

If your business is based in London and you have a high-polluting vehicle, scrapping or retrofitting it could be the best option.

Although there isn’t a national scrappage scheme at the moment, more low emission zones are being introduced across the UK. As a result, drivers of non-compliant commercial vehicles could benefit from exchanging them for low emission alternatives.

It’s also worth considering that the sale of new diesel and petrol vans will be banned from 2030. Although owners of these vehicles will still be able to drive them after this date, there could be a lot of areas where you’ll need to pay a fee to do so.

Do you have any unanswered questions about the ULEZ scrappage scheme? Let us know in the comments below.

More guides for van drivers

• Commercial vehicles – what van should I buy?
• What’s the difference between comprehensive and third party insurance?
• What is commercial van insurance?
• What is business breakdown cover?