What Happened — VAT Changes After the Budget
In the most recent UK Autumn Budget, the government confirmed that full-rate VAT (20 %) will now apply to private hire vehicle trips — closing the earlier VAT treatment under the Tour Operators Margin Scheme (TOMS) that allowed ride-hailing platforms to account for VAT on a smaller margin. (Newry Chamber)
This change, effective from 2 January 2026, means that platforms operating private hire services (including Uber) and drivers providing transport services may now deal with VAT in a new way:
- If drivers earn above the VAT registration threshold (currently £90,000), they must register for VAT.
- Even drivers below the threshold may find it advantageous to register voluntarily under certain VAT schemes (e.g., the flat-rate scheme) depending on their costs and charges. (TaxiPoint Taxi News)
Uber UK’s Key Comment on the Impact
Andrew Brem, General Manager at Uber UK, said that many London private-hire drivers could be financially better off registering for VAT following the budget changes — especially if they take advantage of schemes such as the VAT Flat Rate Scheme. (TaxiPoint Taxi News)
His point is that depending on how much a driver earns and what expenses they can claim, being VAT-registered may reduce their net tax burden overall or allow them to reclaim input VAT on business expenses. (TaxiPoint Taxi News)
That doesn’t mean all drivers should register — it depends on individual earnings and cost structures — but some could see a financial benefit. (TaxiPoint Taxi News)
Why This Matters for Drivers
Here’s why VAT and the Budget change are significant for drivers:
1. Historic VAT Rules Changed
Previously, many ride-sharing trips were taxed under TOMS, meaning VAT was applied only on the operator’s margin and not on full fare. From early 2026 this is no longer allowed for private hire services. (Newry Chamber)
2. Drivers Might Choose VAT Registration
If a driver’s gross income exceeds the VAT registration threshold (£90,000), they must register for VAT. But even those below the threshold might benefit by registering voluntarily — particularly if they:
- Have substantial business expenses with reclaimable VAT
- Use the flat rate VAT scheme to manage tax more predictably. (TaxiPoint Taxi News)
3. Potential to Reduce Costs
Some drivers’ expenses (like fuel, vehicle servicing, insurance) include VAT. Being registered could let them reclaim VAT on those costs, which may offset the tax they need to pay. (TaxiPoint Taxi News)
Industry Context & Reaction
- The VAT changes follow broader tax policy moves to simplify the taxation of private hire services and ensure consistent VAT collection across the sector. (Newry Chamber)
- Other trade and industry voices have debated this change, with some arguing it could increase fares for passengers and affect driver earnings. (The Standard)
- Platforms like Uber have adapted contract terms to manage VAT exposure (e.g., by clarifying when they act as agent vs supplier), affecting how and when VAT applies. (The Guardian)
Important Considerations for Drivers
VAT registration is mandatory once income exceeds the threshold, but it can also be voluntary below it. (TaxiPoint Taxi News)
Drivers should consider the VAT Flat Rate Scheme or regular VAT accounting depending on their expenses. (TaxiPoint Taxi News)
Consulting a tax professional can help drivers decide whether registration improves their finances. (TaxiPoint Taxi News)
In summary: Following recent UK Budget rules that expanded VAT obligations on private hire services, Uber UK’s leadership has suggested that some drivers (especially in London) might actually benefit financially from VAT registration — not just because they may have to register at higher incomes, but in some cases because it allows them to reclaim tax on business-related costs. (TaxiPoint Taxi News)
Here’s a **detailed look at what Uber UK has said about how recent UK Budget changes on VAT (value-added tax) could affect some of its drivers — including case examples and comments from Uber’s leadership on the issue: (TaxiPoint Taxi News)
1. What Changed After the Autumn Budget
In the Autumn Budget 2025, the Chancellor confirmed changes to how VAT applies to private hire journeys (like Uber trips). Most importantly:
- The government ruled that private hire vehicle operators will no longer use the Tour Operators’ Margin Scheme (TOMS) to calculate VAT on ride fares — a scheme that previously meant VAT was charged only on a small margin rather than the full fare. (TaxiPoint Taxi News)
- This means VAT at the standard 20% rate applies to full fares in London where Uber must act as the principal supplier under Transport for London rules. (TaxiPoint Taxi News)
Elsewhere in the UK, Uber has changed contractual terms so that the platform acts as an agent rather than a principal — meaning drivers contract directly with passengers and Uber charges VAT only on its commission (not the whole fare). (TaxiPoint Taxi News)
2. Case: London Drivers & VAT Registration
Situation
In London, private-hire platforms like Uber still have to treat themselves as the supplier of the full fare — so fares now include 20% VAT. (TaxiPoint Taxi News)
Uber UK’s View (Andrew Brem)
Uber UK’s Regional General Manager, Andrew Brem, has publicly commented on how this affects drivers:
- He explained that because fares in London are now exclusive of VAT, drivers who register for VAT will actually receive 20% VAT from Uber on top of their agreed trip payments. (TaxiPoint Taxi News)
- By contrast, drivers who are not VAT-registered will only receive the base fare without the VAT addition. (TaxiPoint Taxi News)
- Bres stressed that this means some drivers could be better off financially by registering for VAT, especially if they can use the Flat Rate Scheme which simplifies tax compliance and can allow some VAT costs to be strategically managed. (TaxiPoint Taxi News)
Example: A driver in London earning above the VAT threshold (currently £90,000) who registers for VAT could legally charge and retain input VAT on fuel or vehicle expenses — potentially boosting income compared with simply taking base fares and losing VAT on expenses. (TaxiPoint Taxi News)
3. Comments from Uber UK Leadership
Andrew Brem on Budget Changes
In the interview covered by industry reporting:
“We recognise the addition of VAT is a change for London drivers and they might want to take tax advice on the implications for them. It will depend on individual circumstances but many drivers will now likely be better off if they register for VAT and, potentially, access the Flat Rate Scheme.” (TaxiPoint Taxi News)
He further warned that:
“…a VAT hike means higher prices for passengers in the capital, which likely means less work for drivers.” (TaxiPoint Taxi News)
This shows that while VAT registration may benefit drivers who earn enough or manage expenses effectively, there’s also recognition that higher overall prices could affect trip demand — which in turn affects earnings. (TaxiPoint Taxi News)
4. Practical Considerations for Drivers
When VAT Helps
Drivers may benefit from registering for VAT when:
- Their income (from multiple sources including ride-hailing) exceeds the VAT threshold.
- They want to reclaim VAT on business expenses like fuel and repairs.
- They use the Flat Rate VAT scheme, which can allow simplified reporting and sometimes a lower effective rate. (TaxiPoint Taxi News)
What It Requires
- VAT registration brings administrative duties — filing regular returns and keeping records.
- It’s not automatically the best choice for every driver, especially those with lower turnover or minimal reclaimable costs. (TaxiPoint Taxi News)
- Uber has even partnered with accounting firms to help drivers understand their options. (TaxiPoint Taxi News)
5. Wider Industry Context & Reactions
Other industry voices and reporting also highlight how this VAT shift has sparked broader debate:
- Drivers’ organizations and local taxi associations have critiqued the move, suggesting it could lead to higher costs for passengers and altered work patterns for drivers. (TaxiPoint Taxi News)
- Some independent accountants note that the removal of TOMS and the need to charge 20% VAT fundamentally changes how ride-hailing operators and drivers manage tax. (vatcalc.com)
- On online discussion boards, some drivers mention concerns about how VAT changes impact pricing and ride demand, though experiences vary widely. (Reddit)
Summary: Key Takeaways
Why VAT Matters Now
- New UK Budget rules ended the use of a reduced VAT margin scheme for most private hire trips from January 2026. (TaxiPoint Taxi News)
- In London, complete 20% VAT applies to full fares because Uber must act as principal; in other regions the agency model aims to limit VAT to commission. (TaxiPoint Taxi News)
What Uber UK Says
- Uber UK leadership acknowledges the change and suggests some drivers may benefit from registering for VAT, especially if they leverage available schemes and professional advice. (TaxiPoint Taxi News)
- The company also warns that VAT will likely increase prices for passengers and could reduce trip demand. (TaxiPoint Taxi News)
Reality for Drivers
- VAT registration can mean extra revenue on top of base fares and reclaimable VAT on costs — but also brings extra reporting duties. (TaxiPoint Taxi News)
- Whether it’s worth it depends on individual incomes, expenses, and how much drivers can benefit from schemes like the VAT Flat Rate Scheme. (TaxiPoint Taxi News)