Heavy Goods Vehicle (HGV) levy: introduction of new reformed levy
Published 15 March 2023
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Who is likely to be affected
UK and international owners and operators of heavy goods vehicles (HGVs) within the HGV Road User Levy (“HGV levy”) using the UK road network.
General description of the measure
The existing HGV levy applies to HGVs of 12 tonnes or more and is aimed at making sure these vehicles make a contribution reflecting the wear and tear of the road network. Until it was suspended in August 2020, the levy amount varied according to the levy duration and the vehicle’s weight, axle configuration, and EURO emissions class.
The current levy is suspended until August 2023 and a new reformed levy will then be introduced.
In order to switch the focus of the HGV levy towards indicative levels of CO2 emissions, the reformed levy varies according to the vehicle’s weight (in addition to EURO emissions class), since data shows that there is some correlation between weight and CO2 emissions.
As part of the measure, there is also a change in levy coverage for foreign vehicles to clarify the levy’s compliance with international obligations, an administrative change removing the requirement to provide a public register of levies paid, and a technical anti-avoidance change related to the end of the levy suspension period.
Policy objective
The government has been clear that it wanted, in the longer term, to move towards setting a levy based on the environmental performance of HGVs, as mentioned in the original 2012 consultation on the introduction of the levy. In 2019, the government amended the HGV levy such that, in addition to reflecting damage to the road, it reflected air quality pollution through varying the levy by EURO emissions class.
These reforms to the HGV levy are a further step towards reflecting the environmental performance of the vehicle, focusing more on air quality emissions and indicative levels of CO2 emissions. For foreign-registered vehicles, the reforms also ensure the levy is focused on road usage and that it is more clearly aligned with the government’s international obligations.
The government remains committed to ensuring that the levy applies to all HGVs for using the UK road network. Prior to the levy’s introduction in 2014, operators of UK-registered HGVs paid charges or tolls in most European countries for use of the road network in those areas, but foreign-registered HGVs did not pay to use the UK’s road network. This imbalance was regarded by many as unfair to UK operators, which the government sought to address by introducing the HGV levy.
Background to the measure
The HGV levy has been suspended from 1 August 2020 to support the haulage sector and aid pandemic recovery efforts. Since the levy suspension, the government has been considering whether to reform the levy, or to return to the original levy, when the current suspension ends from August 2023.
In June 2022, the Department for Transport consulted on HGV levy reform options. The consultation sought views on the proposals to align a reformed HGV levy with the environmental performance of the vehicle and ensuring that the levy liability is as closely aligned as possible to when a foreign vehicle is used on a major road.
Having considered these views, the government decided to take forward all the proposals contained in the consultation document. The reforms to the levy were announced at Budget 2023 and a government response was also published.
The reformed levy will be legislated for in Finance Bill 2023, and will take effect from 1 August 2023 following the end of the suspension period for the existing levy.
Detailed proposal
Operative date
The reformed HGV levy will take effect from 1 August 2023, following the end of the levy suspension period. The technical anti-avoidance change will take effect from15 March 2023.
Current law
The HGV levy is established by the HGV Road User Levy Act 2013. Schedule 1 of the Act contains the current rates.
Proposed revisions
Legislation will be introduced in Spring Finance Bill 2023 to amend the HGV Road User Levy Act 2013 to implement the reformed levy.
As per the amended Schedule 1, the rates will be as follows:
| Weight category | Newest, cleanest vehicles (EURO VI or later) | Older vehicles (Euro V or earlier) |
|---|---|---|
| From 12 tonnes, and up to 31 tonnes | £150 | £195 |
| Above 31 tonnes, and up to 38 tonnes | £360 | £468 |
| Above 38 tonnes | £576 | £749 |
Shorter-term rates will be available for foreign vehicles as before, using the same rules. The daily rate will be set at 2% of the annual rate (capped at £9 for Euro VI vehicles and £10 for Euro 0-V vehicles), and the weekly and monthly rates will be 5% and 10% of the annual rate respectively.
For non-UK registered HGVs driving in the UK, the circumstances under which a levy must be paid will change, meaning they will only be liable when using major roads, and when driving rather than when parked. Also for non-UK registered HGVs, it will no longer be a requirement for the government to provide a website, available to the public, showing whether a vehicle has a valid levy or not.
Further amendments to the HGV Road User Levy Act 2013 apply in respect of public register changes. Amendments also apply to Finance Act 2020 for the anti-avoidance changes, which will enable DVLA to issue a payment notice in circumstances where taxpayers have benefited from more than twelve months of zero-rate levy relating to the last twelve months of the levy suspension.
Summary of impacts
Exchequer impact (£m)
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| — | -45 | -65 | -65 | -70 | -70 |
These figures were set out in Table 4.1. of Spring Budget 2023 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Spring Budget 2023.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is no impact on individuals as this measure only affects businesses.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts on those in groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses. One-off costs will include familiarisation with the rate change and update administrative systems. There are not expected to be any continuing costs. Customer experience is expected to remain broadly the same as this measure does not significantly change existing processes. This measure is not expected to impact civil society organisations.
Operational impact (£m) (HMRC or other)
There will be some operational impact on the Driver and Vehicle Licensing Agency (DVLA). DVLA administers the levy for UK hauliers and manages the contract with the company administering the levy for foreign hauliers. Both these systems will require some software changes.
Other impacts
The government is aware that registered vehicle weight is only an approximation for the CO2 emissions of a vehicle in typical use and also that the costs of the levy likely make up a small proportion of HGV operating costs. Therefore, any incentive effect arising from changes to the levy structure is likely to be small. However, the changes will be a further step to align the levy with the government’s environmental objectives.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review by DVLA, the Department for Transport, and HM Treasury through communication with key stakeholders.
Further advice
If you have any questions about this change, please contact Peter Steele on telephone 07966 511 853 or email [email protected]