Chancellor Rachel Reeves has announced a significant change to Vehicle Excise Duty (VED), introducing a 12-month road tax holiday for heavy goods vehicles (HGVs). The measure, unveiled as part of the Great British Summer Savings Scheme in Parliament today, will save typical heavy lorries up to £912.
Details of the Tax Holiday
Speaking in the House of Commons, Reeves confirmed that the government is granting a 12-month road tax holiday for HGVs, effectively reducing the annual VED from £912 to £0 for eligible vehicles. This move aims to support the haulage industry, which has faced rising costs.
Additional Support for Farmers and Rail Freight
To further assist farmers and the rail freight industry, Reeves announced a cut in duty on red diesel by over a third until the end of this year. This measure is designed to reduce operating costs for agricultural and rail freight sectors.
Increase in Tax-Free Mileage Rates
In response to representations from Labour former minister Jim McMahon and the trade union Unison, Reeves also announced a 10p per mile increase in tax-free mileage rates, backdated to April 2026. This change benefits those who need to drive for work, including care workers and plumbers.
Economic Impact and Future Budget
HM Treasury expects these reforms to raise hundreds of millions of pounds annually, which will fund the package of measures. Final costings for all measures will be published at the next Budget following certification from the Office for Budget Responsibility.
Political Reaction
Responding to the announcement, Reform UK's Treasury spokesperson Robert Jenrick criticized the Chancellor for finding 'small ways to subsidise people's costs.' He argued that the best solution is to build a strong economy through supply-side reforms, leading to better jobs and higher wages. Jenrick asked Reeves to confirm she would not increase taxes on working people for the rest of the parliament. Reeves retorted, stating she would take no lessons from someone whose party took the economy to its knees, with inflation at 11% and working people worse off.
