Why the price of YOUR Uber goes up: Labour’s ‘taxi tax’ might ship fares hovering with 20% VAT hike
The cost of Ubers and cabs could increase by more than 15 per cent if the chancellor goes ahead with plans for a ‘taxi tax’ in the next budget.
A potential 20 per cent VAT on private hire vehicle journeys in the next budget on November 26 could hike fares – leaving vulnerable people and the elderly at risk if they are unable to afford a taxi.
Bosses at Uber, Bolt and Veezu – the biggest private vehicle hire apps in the UK – have written to Rachel Reeves urging her not to introduce the tax.
In a joint letter to Rachel Reeves, the executives said: ‘We are united in urging you not to impose an inflationary VAT increase that would hit vulnerable passengers by driving up the cost of fares for transport services which are an essential lifeline.
‘Fares would rise dramatically to cover the cost of a VAT hike. The impacts of this would be felt acutely by those who rely on minicabs and private hire vehicles in their daily lives.’
They added: ‘People with mobility issues and the elderly will become more isolated from their communities and find it harder to get to the shops and essential appointments, as they struggle with rising costs.
‘Women’s groups, such as the Survivors Trust, have sounded the alarm too, warning the taxi tax would cause more people, especially women, to take risks with their safety.’
Private hire operators like Uber and Bolt do not pay VAT as the drivers themselves are defined as self-employed contractors and do not meet the earnings threshold of £90,000 a year.
Vulnerable customers such as the elderly and women travelling at night could be the worst affected
But in a 2023 High Court legal battle, it was ruled that taxi firms, not drivers, held the contract with passengers – meaning that the taxi company would be liable for VAT.
Most black cab journeys won’t be subject to VAT since the drivers are self-employed and do not meet the earnings threshold, while booking apps do vastly exceed the earnings threshold.
Apps and ride-hailing companies say that if tax is hiked in the next budget, potentially vulnerable customers will be forced to foot the bill.
HMRC had a consultation on the issue in he summer of 2024 and has said it will respond at the next budget.
The Treasury said: ‘We are reviewing feedback from our recent consultation and will publish our detailed response shortly.’
