Chancellor Rachel Reeves has confirmed new Vehicle Excise Duty (VED) rates for thousands of drivers, taking effect from Wednesday, July 1, 2026. The temporary reduction applies to most heavy goods vehicles (HGVs) over 3,500kg that renew their tax during the next 12 months, with eligible lorries seeing their VED slashed to just £1 until June 30, 2027.
Details of the VED cut
The Labour Party Chancellor announced the change in May, and it came into force on Wednesday. The 12-month road tax holiday is designed to provide relief for hauliers facing high operational costs. Speaking to MPs, Reeves said: "For hauliers, the Government is granting a 12-month road tax holiday for HGVs, saving the typical heavy lorry up to £912."
Industry reaction
Richard Smith, Managing Director of the Road Haulage Association, acknowledged the short-term benefit but expressed caution. He warned that while a one-off 12-month HGV VED "holiday" will offer some relief, overall the Government's action will have "limited impact with many haulage, coach and van operators already on the brink." He added: "In the longer term we urge her to decouple fuel duty from RPI, which is planned to start next April when prices will rise again."
Government rationale
Prime Minister Keir Starmer said the measures aim to protect households and businesses from the impact of global instability on fuel prices. He stated: "I know many are feeling the pressure of energy and fuel costs and are worried about how the conflict in Iran will affect their finances. Because when global events drive up prices, it’s working people who feel it first. That’s why this government is stepping in to keep fuel costs down for millions of drivers and putting money back in the pockets of working people."
Broader fuel duty context
Paul Holland, Managing Director for UK/ANZ Vehicle Payments at Corpay (including UK brand Allstar), commented on the wider fuel duty landscape. He said: "Fuel price volatility has plagued fleets for so long it risks being accepted as the norm, but it shouldn’t be. The Chancellor’s reported plans to scrap the planned 5p fuel duty increase is welcome news and will offer some much-needed breathing space for businesses already under pressure." He added: "That said, the freeze doesn’t solve the underlying challenge that fuel remains one of the biggest operational costs for fleets. Our recent research of 300 UK SMB owners and directors who manage fleets of 4 to 20 vehicles shows that just 45% of businesses have meaningful visibility over what their fleet is actually spending, leaving the majority exposed when prices move. Businesses that will navigate these turbulent times most effectively are those using data to take control: tracking driver spending patterns, setting tailored spend limits, and acting on detailed insights. The tools exist – the priority now is putting them to work."
