Taxi and private hire journeys booked through apps like Uber are set to become significantly more expensive from next year, following a key change announced in Chancellor Rachel Reeves' Autumn Budget. Experts are warning the move could add up to 20% to the cost of a trip.
The End of a VAT 'Loophole'
The core of the change is a technical adjustment to VAT rules. From 2 January 2026, suppliers of private hire and taxi journeys will no longer qualify under the Tour Operators' Margin Scheme (TOMS).
As HMRC states, the measure "excludes suppliers of private hire and taxi journeys from being 'tour operators' for the purposes" of the scheme. In practice, this means 20% VAT will now be due on the full fare, rather than just on the operator's margin, pushing prices upward.
A Blow to Businesses and Young People
Business leaders have criticised the policy, dubbing it a "taxi tax" that will have wide-ranging negative consequences. Kate Underwood, Founder of Kate Underwood HR and Training in Southampton, said the move shows a lack of understanding of how modern businesses operate safely.
"If you ever needed proof that Rachel from Accounts has never tried getting a junior home safely at 11pm, this taxi tax is it," she commented. Underwood explained that firms use services like Uber for their safety, traceability, and cash-free convenience as part of their duty of care. She warned that rising costs, combined with other fiscal pressures, make it increasingly expensive to be a responsible employer.
Financial expert Scott Gallacher, Director at Rowley Turton in Leicester, echoed these concerns. "Although the Government presents this as a technical VAT correction, in practice it appears as an Uber tax that will drive up ride-hailing costs by 15%–20%," he said.
Targeting the Most Vulnerable Commuters
Both experts highlighted the disproportionate impact the change will have on younger people and those in areas with poor transport links. Gallacher called it "yet another example of intergenerational unfairness," noting that the young already grapple with high car insurance and living costs.
"This change also hits people in rural and poorly served areas who rely on apps because they simply don’t have other transport options," he added. "It’s a policy that ends up punishing the very groups with the fewest alternatives."
With the new rules coming into force in early 2026, millions of passengers who rely on app-based travel for work, safety, or necessity are facing a substantial new cost in their daily lives.
