UK plans to make large private hire operators charge VAT on the full fare from 2 January 2028

What changed in detail

This is a proposal, not yet law. At Budget 2026 (28 October 2026) the UK government said it will introduce legislation in Finance Bill 2026-27 to change the VAT treatment of passenger transport by taxi or private hire vehicle when supplied through an agent. The service would be deemed to be made by the agent, not the driver, so the private hire vehicle operator would have to charge VAT on the full value of the fare.

The deeming would only apply to businesses whose annual fare turnover exceeds a specified threshold. The government will consult on the level of that threshold, with £50 million annual fare turnover the lead option; the consultation will also inform final policy design and implementation. The government states the change will take effect from 2 January 2028.

What it means

Many drivers trade below the VAT registration threshold, so under an agency model most of the fare carries no VAT. Deeming the operator to be the supplier puts 20% VAT on the whole fare for the largest platforms only, which will push either fares or driver pay. Operators near the £50 million figure should follow the consultation closely, because the threshold, not the deeming rule, decides who is in.