UK government plans 20% VAT on taxi fares

The UK Government is reportedly set to announce a standard 20% VAT on all taxi and private hire vehicle fares in the upcoming Autumn Budget, a measure predicted to raise around £750 million annually for the Treasury.

The proposed tax hike has drawn strong criticism from industry bodies, who warn that it will disproportionately impact rural communities where taxis and private hire vehicles serve as essential transport for residents without reliable public transport options. Campaign for Better Transport’s Michael Solomon Williams emphasised that rather than filling gaps in accessible travel, the tax would undermine connectivity and increase costs for vulnerable passengers.

The Telegraph reported that, currently, most taxi operators outside London do not charge VAT on full journeys because their drivers, considered self-employed contractors, fall below the £90,000 threshold for VAT registration. Despite a Supreme Court ruling last July upholding this status quo, Treasury ministers have confirmed that they remain committed to standardising VAT treatment across the sector in the forthcoming Budget.

In Scotland, the Scottish National Party has formally condemned the plans through a motion submitted by Kevin Stewart MSP on 22 September. The motion warns that a blanket 20% VAT would “kill the taxi trade” and disproportionately harm lower-income, disabled and older people who rely on taxis for essential journeys, risking increased poverty, social isolation and loneliness in their communities.