HM Revenue & Customs published a tax information and impact note on 29 October 2026. From 2 January 2028, a taxi or private hire journey supplied through an agent is to be treated as made by the agent, not the driver. Where that operator is registered for VAT, it will account for VAT on the full value of the fare.
The treatment applies only where annual fare turnover exceeds a threshold. Businesses below the threshold are not affected. The government will consult on the level of the threshold, and on the final design and how the measure is put into practice. The lead option is £50 million of annual fare turnover.
Principal or agent
In London, a private hire operator has to act as the principal, the person who supplies the journey to the passenger. Outside London, the operator may act as the driver's agent. The driver then accounts for VAT on the full fare if the driver is registered for VAT. The stated aim is to put larger operators on the same VAT footing, because that split leaves them competing on different terms, while smaller businesses stay outside the change.
Section 47
Section 47 of the Value Added Tax Act 1994 is to be amended. A new subsection 4A would treat private hire vehicle services supplied through an agent as both a supply to the agent and a supply by the agent. The agent is treated as buying the journey from the driver and then supplying it to the passenger, and must charge output VAT on that supply. A new section 4B would give the Treasury powers to set when that deeming does not apply.
There is no VAT law that applies specifically to private hire vehicles. Operators and drivers charge VAT under the ordinary rules of the 1994 Act.
Fares, passengers and the scorecard
The exchequer table, in millions of pounds, shows no amount for 2026 to 2027. It then shows 95 for 2027 to 2028, 385 for 2028 to 2029, 395 for 2029 to 2030, 410 for 2030 to 2031 and 425 for 2031 to 2032. The figures are those in Table 6.1 of Budget 2026, certified by the Office for Budget Responsibility. No significant effect on the wider economy is expected.
Passengers may pay a different fare if an operator changes its prices. HMRC does not hold data it can use to judge whether any effect would fall disproportionately on people with protected characteristics. Its note cites evidence on private hire use in England that people with mobility issues take more trips a year than people without those issues, and that women take more trips a year than men.
On the larger private hire businesses captured by the measure, the extra administrative cost is put at negligible. One-off work is familiarisation. Ongoing work is charging and accounting for the correct VAT on the fares in scope. The change is not expected to alter the tax administration processes those businesses, or individual passengers, already use. HMRC will not incur any cost of its own in implementing the change.
Some private hire drivers may decide to register for VAT voluntarily because of the measure. It is unlikely to result in more businesses being required to register.
The 2024 consultation
In April 2024, HM Treasury, HMRC and the Department for Transport consulted on the VAT treatment of private hire vehicles. The response was published at Budget 2025.