Chancellor Rachel Reeves has announced a significant reduction in Vehicle Excise Duty (VED) for heavy goods vehicles (HGVs), cutting the annual tax to just £1 for a 12-month period. This move, described as a "holiday" from the usual charges, aims to support drivers and businesses amid rising fuel costs.
Who Qualifies for the £1 VED Rate?
The reduced rate applies to HGVs over 3,500kg in specific tax classes: standard HGV (TC01), trailer HGV (TC02), special types (TC57), combined transport (TC23), and island goods vehicles (TC16). It covers renewals between July 1, 2026, and June 30, 2027. Vehicles taxed before July 1, 2026, will be charged at the current rate, and no refunds will be issued.
Savings for Drivers
According to Ms Reeves, a typical heavy lorry will save around £600, while the largest vehicles could save up to £912. The British Vehicle Rental and Leasing Association (BVRLA) confirmed the temporary rate applies only to vehicles taxed within the specified window.
Government Rationale
Ms Reeves stated: "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." She emphasised that protecting households and businesses builds a stronger economy for Britain.
Important Notes
The HGV levy will continue to be charged at the existing rate for vehicles liable for it. A revised V149/1 form will be published, and an information page on GOV.UK is expected soon. The BVRLA will share further guidance with members once official details are released.
This initiative is projected to provide essential support for HGV operators and their customers over the next 12 months.
