Chancellor Rachel Reeves has confirmed a nominal £1 Vehicle Excise Duty (VED) charge for approximately 680,000 HGV drivers, effective from July 1, 2026, through June 30, 2027. This 12-month payment holiday reduces the typical annual tax from £600 to just £1 for eligible heavy goods vehicles, with larger vehicles saving up to £912 per year.
Details of the Tax Cut
The reduced VED applies automatically to eligible vehicles taxed or re-taxed between July 1, 2026, and June 30, 2027. The relief covers multiple vehicle tax classes, including HGVs (TC01), HGV trailers (TC02), small islands vehicles (TC16), combined transport vehicles (TC23), and special types vehicles (TC57), according to the British Vehicle Rental and Leasing Association (BVRLA). The HGV Levy remains payable where applicable, and Direct Debit is not available for vehicles receiving the reduced rate.
Impact on Hauliers
The Road Haulage Association (RHA) stated: "From 1 July, eligible HGV operators renewing vehicle tax will pay £1 in VED under the Government’s new 12-month payment holiday." Data from the RHA indicates there are approximately 58,262 road freight enterprises and around 684,000 HGV drivers in the UK. The government estimates the policy will save a typical heavy lorry £600 annually, while the largest vehicles will save roughly £912 per year.
Political Context
Ms Reeves, widely expected to be replaced as Chancellor when Andy Burnham becomes Prime Minister, previously said: "I’m keeping taxes down for drivers and businesses – putting money in the pockets of millions of workers and cutting costs for farmers and hauliers. The war in Iran is pushing up fuel prices here at home but after strong growth at the beginning of the year, I am stepping in to protect people at the pump."
