UK – Platform Operators: VAT Rules on Taxi Fares from 2026 

The UK Chancellor indicated that, starting in January 2026, a tax provision will take effect, clarifying the VAT applicability to taxi fares in the UK. This measure was presented with great importance during the November Budget presentation by the Chancellor. 

This provision should have ended the permitted possibility, which significantly benefited platform operators such as Uber, who could apply VAT only to their commissions, not to the full taxi fare, for transport services conducted outside London. ( London city has special rules for these services) 

Under the newly adopted rules, for passenger transport services in the UK booked via apps such as Uber, the platform operator is accountable for VAT on the full taxi fare, not only on the commission it charges to facilitate the service. 

In practical terms, the ride-hailing app, such as Uber, under its 2025 business model should be accountable for VAT on the full taxi fare, not only on its commission. The Chancellor indicated that these measures should generate around GBP 700 million only in 2026. 

However, the new measure will generate significantly less tax revenue because Uber has adjusted its contracting terms with third-party service providers (drivers) using its app to provide passenger transport services. 

From 2026, Uber will act as “an agent” rather than a supplier for “ride-hailing services” provided outside London, and in that manner will lawfully “dodge” the VAT accountability that otherwise should have been calculated on the full taxi fare. 

This adjustment to the contract terms with drivers legally means that drivers will enter into a direct contract with passengers. Hence, the VAT accountability for the taxi fare is the taxi driver’s responsibility, while Uber is accountable for the VAT charged on its booking fee. 

Will this fair and totally legit contractual adjustment spark a reaction from the UK HMRC, potentially leading to amendments to the nationally applicable VAT rules for passenger transport services? 

Remains to be seen.