UK – New VAT Rules for Private Hire Vehicle Operators from 2026

As a part of its 2025 Autumn Budget speech held on November 26, the UK’s Chancellor confirmed the introduction of “Taxi Tax”. The Tour Operators Margin Scheme(TOMS), a specific VAT accounting scheme, has been a hot topic in recent years. 

This particular VAT scheme was adopted solely to simplify VAT collection for businesses in the international travel industry.

However, in recent years, many private hire vehicle (taxi) operators have been leveraging this scheme, benefiting from a loophole in VAT collection. Ride-hailing platforms were the first ones to profit massively from this loophole. 

This tax provision, and the related use of the TOMS scheme, permit these digital platforms to apply reduced VAT rates to their services or not apply VAT on the full fare of the taxi service, but only on the margin. 

This tax collection methodology allows these platform operators to generate substantial revenue while remaining on an uneven playing field with other taxi/journey service providers that must apply the 20% VAT rate to the full fare. 

To instigate clarity regarding the TOMS VAT scheme and how the tax should be collected by private hire taxi operators or taxi drivers, the possibility of using the TOMS scheme exclusively for this type of service shall be abolished. 

Starting from January 2, 2026, PVHO and VAT-registered taxi service providers should apply a 20% rate to the full amount for their taxi services. There will still be tax scenarios in which taxi operators could benefit from reduced VAT rates for part of their services, but under more rigorous conditions, with less maneuvering to “escape” the standard VAT rate. 

This tax change will likely influence the pricing strategies of ride-hailing platforms (such as Uber or Bolt) and the final prices customers pay.