Jurisdiction(s):
United Kingdom

Finance Bill 2026 (UK VAT): PHV/taxi operators excluded from TOMS—20% VAT on full fares from 2 January 2026; implications for principal/agent models, pricing and compliance

Published on: 23 December 2025

Published by a LexisNexis Tax expert

Legal News

Article summary

In the 2025 Budget, the government set out a package of VAT changes for UK firms that need to be grasped and prepared for before their 2026 launch. They affect how businesses set prices for PHV services.

From 2 January 2026, VAT-registered PHV and taxi operators that enter into direct contracts with customers must add 20% VAT to the entire fare, as they will be expressly carved out of TOMS; see clause 79 of the Finance Bill 2026 (as introduced).

In London, regulation already requires operators to contract directly with customers as a licensing requirement. In other regions, the position depends on how agreements are set up.

What will this mean for operators and customers?

At present, most private hire and minicab drivers who deal directly with passengers do not have to levy VAT on passenger fares. Typically this is because these drivers—many earning below the £90,000 per annum VAT registration threshold—are treated as self-employed contractors...

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