From the overnight subsistence allowance to the genuine self-employment question, here is what every owner-driver and contractor needs to know about HGV tax.
Before a single expense is claimed, every HGV driver needs to answer one question honestly: are you actually self-employed? More than any other trade, lorry driving is plagued by "false self-employment", where an agency or haulier labels a driver self-employed to dodge employer National Insurance and holiday pay, when in reality the driver is, in tax terms, an employee. HMRC has won case after case on this point, and the bill, backdated PAYE plus penalties, usually lands on the driver. So this guide starts with status, then covers the expense that genuinely defines lorry-driver tax: the overnight subsistence allowance.
If you are a genuine owner-driver providing your own truck and taking on financial risk, the rest of this guide is for you. If you only turn up and drive someone else's vehicle on their instruction, read the status section carefully before you file anything.
Calling yourself self-employed does not make it so for tax. HMRC looks at the reality of the working relationship, not the label on a contract. The hallmarks of genuine self-employment for an HGV driver are: you provide your own vehicle, you carry real financial risk (you can profit or lose), you decide how and sometimes when the work is done, you can send a substitute, and you are not under day-to-day supervision like an employee.
A typical agency driver fails most of these tests. They drive the haulier's truck, follow the transport manager's instructions, take no financial risk, cannot send anyone else, and are paid by the shift. In HMRC's eyes that is employment, and the agency, or in some cases the driver, can be pursued for unpaid PAYE and National Insurance going back years. The off-payroll and agency rules exist precisely to stop this.
If you are a genuine owner-driver, you are correctly self-employed and the rest of this guide applies. If you are unsure, do not assume; the cost of getting it wrong is far higher than the cost of checking. If you also have PAYE driving shifts alongside owner-driver work, use HMRC's tax code checker so your personal allowance is not double-counted across both.
As a genuinely self-employed owner-driver you pay Income Tax and Class 4 NIC on your profit, your haulage income minus allowable expenses, reported on a Self Assessment return by 31 January each year.
| Threshold | Rate |
|---|---|
| Up to GBP 12,570 (personal allowance) | 0% Income Tax |
| GBP 12,571 to GBP 50,270 | 20% Income Tax |
| GBP 50,271 to GBP 125,140 | 40% Income Tax |
| Above GBP 125,140 | 45% Income Tax |
| Profit GBP 12,570 to GBP 50,270 | 6% Class 4 NIC |
| Profit above GBP 50,270 | 2% Class 4 NIC |
Class 2 NIC is now collected through Self Assessment; you no longer pay the old flat weekly charge above the small profits threshold but still earn state-pension qualifying years. Because haulage turnover is high, many owner-drivers sit in the higher-rate band, which makes claiming every legitimate expense, and the subsistence allowance in particular, financially significant.
This is the deduction that defines lorry-driver tax. When you stay away overnight in a sleeper cab, HMRC accepts a benchmark figure to cover your evening meal, breakfast and incidental costs (a shower, a newspaper, phoning home) rather than forcing you to keep a receipt for every roadside coffee. For 2025/26 the agreed sleeper-cab rate is GBP 34.90 per night.
Two conditions matter. First, you must genuinely be staying away overnight as part of the job. Second, you must actually incur the expense; the allowance reflects real costs, not a flat bonus for being on the road. Keep a simple record of nights away (your tachograph and delivery records support this) and retain enough receipts to show the costs are real. A driver doing 150 nights away across the year is looking at roughly GBP 5,235 of deductions from this allowance alone, which at higher rate is over GBP 2,000 of tax saved.
| Expense | Notes |
|---|---|
| Fuel | Diesel for the truck. If VAT-registered you reclaim the VAT; the net cost is the deductible figure. |
| Truck finance and capital allowances | Interest on truck finance is deductible; the truck itself qualifies for capital allowances (Annual Investment Allowance or writing-down allowances). |
| HGV road tax and the HGV levy | Vehicle Excise Duty for the lorry and the HGV levy are fully allowable. |
| Insurance | Goods-in-transit, motor and public liability cover for the vehicle and load. |
| Tyres, servicing and repairs | Genuine running and maintenance costs of the truck. |
| Overnight subsistence | The GBP 34.90 sleeper-cab rate per qualifying night away. |
| Truck-stop and parking fees | Overnight parking, secure truck stops, washroom and shower charges. |
| Driver CPC and licence renewals | Periodic CPC training, Digital Tachograph card and HGV licence renewals. |
| Protective clothing and equipment | Hi-vis, safety boots, gloves, load straps and a torch. |
| Phone, paperwork and accountancy | Business phone, ferry and toll bookings, software and accountant fees. |
Note how different this is from a labour-only driver, who genuinely has almost none of these costs because they do not own the vehicle. That mismatch is itself a clue to status: if your only "expense" is a pair of boots and a flask, you are probably an employee.
Unlike most sole traders, HGV owner-drivers commonly exceed the GBP 90,000 VAT threshold, because fuel and haulage rates push turnover high quickly. Once over the threshold you must register within 30 days. Many owner-drivers register voluntarily even below GBP 90,000, because the VAT they reclaim on diesel, truck servicing and finance can outweigh the cost of charging VAT to business customers (who reclaim it themselves anyway). If your customers are VAT-registered hauliers, voluntary registration is often a net win. Model it before deciding.
An owner-driver turns over GBP 95,000 hauling for regular contractors in 2025/26, spends 160 nights away in the sleeper cab, and is VAT-registered (so figures below are net of VAT).
Allowable expenses (net):
Total expenses: GBP 66,084
Taxable profit: GBP 95,000 minus GBP 66,084 = GBP 28,916
Income Tax: GBP 28,916 minus GBP 12,570 = GBP 16,346 at 20% = GBP 3,269
Class 4 NIC: GBP 16,346 at 6% = GBP 981
Approximate tax and NIC: GBP 4,250 for the year. The overnight subsistence allowance alone removed GBP 5,584 from taxable profit, worth over GBP 1,100 in combined tax and NIC. Run your own position in the sole trader tax calculator.
Making Tax Digital for Income Tax replaces the annual return with quarterly digital updates plus a final declaration. The dates are April 2026 for self-employment income over GBP 50,000 and April 2027 over GBP 30,000, with a planned extension to GBP 20,000 from April 2028. Because owner-drivers routinely turn over more than GBP 50,000, most will be mandated in the first wave and need MTD-compatible software now. The discipline that helps most is logging nights away and subsistence as you go, alongside fuel and truck costs, rather than rebuilding a year of pump receipts in January. Our MTD for sole traders guide covers what quarterly submission involves.
1. Assuming "self-employed" status is settled. It is the most expensive mistake in the trade. Labour-only agency drivers are usually employees; filing as self-employed when you are not invites a backdated PAYE bill.
2. Over-claiming subsistence. The GBP 34.90 sleeper-cab rate is for genuine nights away with real costs, not a flat daily bonus. Claiming it for nights you were home will not survive an enquiry.
3. Forgetting capital allowances on the truck. The vehicle is usually an owner-driver's biggest asset; missing the Annual Investment Allowance or writing-down allowance leaves significant relief on the table.
4. Not registering for VAT when it pays to. With high fuel costs and VAT-registered customers, voluntary VAT registration can save money. Many owner-drivers never run the numbers.
5. Mileage confusion. The flat 45p mileage rate is for cars and vans, not heavy goods vehicles. Owner-drivers claim actual truck running costs and capital allowances instead; do not try to apply the car rate to an HGV. The mileage calculator is for any car you also use for the business, such as a runaround to the depot, not the lorry itself.
For a genuine owner-driver, the overnight subsistence allowance and the capital allowance on the truck do most of the heavy lifting. For an agency driver, the real question is whether they should be self-employed at all.
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