UK ends VAT break for London ride-hailing, boosting traditional cabs but raising fare concerns.

Starting January 2, 2026, the UK government removed private hire and taxi services in London from the Tour Operators' Margin Scheme, requiring them to pay 20% VAT on the full fare, ending a tax advantage that previously allowed companies like Uber and Bolt to pay as little as 4% VAT. The change, part of Chancellor Rachel Reeves’ November 2025 budget, aims to level the playing field for traditional cabbies and generate £700 million annually. However, Uber has restructured its operations outside London to an agency model, shifting VAT responsibility to drivers and limiting tax exposure. The policy does not apply to journeys bundled with travel packages or to drivers providing direct services. While the Licensed Taxi Drivers Association welcomed the move as fairer, critics argue it creates inconsistent tax rates and may raise fares.