The 2026 VAT change on private hire, and what it means for drivers

For years operators such as Uber used the Tour Operators' Margin Scheme, which let them account for VAT only on their margin, not on the whole fare. In March 2025 the Upper Tribunal ruled against Bolt on the point, and at the November 2025 Budget the government closed the scheme to private hire and taxi operators from 2 January 2026.

What changed

An operator that supplies the journey itself, contracting with the passenger as principal, now accounts for VAT at 20% on the full fare. HMRC's brief is clear that operators acting as disclosed agents are not affected, and that drivers are affected only if they themselves used the margin scheme, which almost none did.

London and everywhere else

London's licensing rules have operators contracting as principal, so the change bites there. Outside London, a separate case asked whether operators must also act as principal. The Supreme Court said in July 2025 that they need not, so an operator outside London can still act as agent between driver and passenger, and the VAT position depends on how it has set itself up.

What it means for you

• You do not charge VAT because of it.
• You register for VAT only if your own taxable turnover passes £90,000 in a rolling 12 months.
• Fares in London were expected to rise, and operators said higher prices could mean fewer trips. Watch your own hourly rate rather than the headlines.
• Your turnover for income tax is unchanged in principle: the fares, before commission, as your statement shows them.

Black cabs and small operators where passengers book directly with drivers are outside the change.