The 2026 Private Hire VAT Changes: London vs. Rest of UK

January 2026 was the most consequential VAT change for UK private hire drivers in a decade. Following litigation through 2023-25, HMRC clarified that the Tour Operators Margin Scheme (TOMS) does not apply to most ride-hailing platform structures, and London Uber moved from a Principal contract structure (Uber as the principal supplier of a transport service) to a regime where 20% VAT applies on the full London fare. Outside London, Bolt, FreeNow and (in some structures) Uber operate Agent contracts where the driver is the principal supplier and individual VAT registration thresholds apply.

For high-mileage London drivers crossing £90,000 of annual gross fares, the change affects net take-home materially. For drivers outside London, the change is more nuanced and depends on the operator's contractual structure. This guide covers the operating reality for both groups.

The January 2026 London Uber VAT change

For London Uber rides, the post-January-2026 VAT treatment:

• Uber is treated as the principal supplier of London transport.
• The full London fare attracts 20% VAT, charged to the passenger.
• Driver receives a contracted payout from Uber after Uber's commission and VAT.
• Drivers with London-only earnings typically do not breach individual £90k thresholds because Uber accounts for VAT centrally.
• Net take-home per fare drops slightly because the VAT cost erodes the headline fare more than the previous TOMS structure did.

Principal vs Agent contracts: the structural difference

For a Manchester or Birmingham multi-app driver, the practical implication is unchanged: track gross fares carefully, monitor against the £90k threshold, and register individually if crossed.

The £90,000 individual driver threshold

For drivers with Agent-structure contracts, individual VAT registration:

1. 1Triggered when gross taxable turnover exceeds £90,000 in any rolling 12-month period.
2. 2Forward-looking trigger: must register if expected to exceed £90,000 in the next 30 days alone.
3. 3Calculated on gross fares before platform commission.
4. 4Multi-app drivers: total all platforms when testing.
5. 5Once registered: charge 20% VAT on fares, file quarterly VAT returns, can reclaim input VAT on business expenses.
6. 6De-registration available if turnover falls below £88,000 in any rolling 12 months.

The end of TOMS for ride-hailing

The Tour Operators Margin Scheme (TOMS) historically allowed some platform operators to charge VAT on the margin (commission) rather than the full fare. Following 2023-25 litigation:

• TOMS does not apply to ride-hailing services in most contractual structures.
• The full fare attracts VAT (where the platform is the principal) or full registration applies (where the driver is the principal).
• Platforms that previously used TOMS-style structures restructured during 2024-25.
• Historic TOMS treatment cannot be relied on for 2026 onwards.

Reclaiming VAT on a new private hire vehicle

For VAT-registered drivers buying a new PCO vehicle:

• New car purchase: input VAT recoverable in full only where the vehicle is used wholly for business (very rare for drivers, who typically have some private use).
• Mixed-use vehicle: input VAT only recoverable on the qualifying business proportion.
• Lease payments on a PCO car: 50% of input VAT recoverable (HMRC convention reflecting typical private use).
• Repairs, servicing, accessories: input VAT recoverable in full where business use is at least 51%.
• Fuel: input VAT recoverable on business-mileage proportion.

VAT when driving for multiple operators

For drivers working Uber + Bolt + FreeNow simultaneously:

• Threshold testing combines all platforms' gross fares.
• Where contractual structures differ (Uber Principal in London; Bolt Agent), VAT treatment may apply differently per platform.
• Driver registration covers all platforms simultaneously: cannot register for Bolt and stay unregistered for Uber.
• Output VAT charged on all Agent-structure platforms; not separately on Principal-structure platforms (already handled by them).

Flat Rate Scheme for VAT-registered drivers

The Flat Rate Scheme (FRS) simplifies VAT for small businesses:

• Eligibility: VAT-inclusive turnover under £150,000.
• Drivers typically classified under "Taxi or chauffeur" sector at 11.5% rate, or "Limited Cost Trader" at 16.5%.
• The Limited Cost Trader rate applies if vehicle goods purchased are under 2% of turnover or under £1,000/year.
• For most modern PCO drivers (low fuel cost relative to fares), LCT classification reduces FRS benefit substantially.
• Below LCT threshold: standard accrual VAT typically wins for genuine fuel-heavy drivers.