BLACK CAB BOOST: Rachel Reeves says VAT rule change will allow London black cabs to ‘compete fairly on price from 2026’
- Perry Richardson
- 23 minutes ago
- 2 min read
The Chancellor has said changes to VAT rules announced at the Budget will allow London’s black taxi drivers to compete more fairly on price with large online minicab operators from 2026, after years of what the trade describes as distorted competition.
In a video shared on social media, Rachel Reeves is seen speaking with Steve McNamara while sitting in the back of a London black cab. The post accompanies her explanation of why the Government has moved to block private hire operators from using the Tour Operators Margin Scheme (TOMS).
“Everyone should pay their fair share of tax,” Reeves said in the post. She added that the Government was “changing the rules so that large online minicab companies are unable to benefit unfairly from a niche tax scheme”, and said the reform would mean “traditional cab drivers will be able to compete fairly on prices in 2026”.
The reference is to the removal of access to the Tour Operators Margin Scheme, a specialist VAT regime designed for genuine travel and holiday businesses, which some private hire platforms had used to significantly reduce the VAT paid on fares. By accounting for VAT only on profit rather than the full fare, the scheme could cut the effective tax rate to around four percent.
Chancellor uses social media video with taxi trade leader to underline end of TOMS advantage for minicab firms
Black taxis are not able to add VAT to a metered fare, but are not exempt from VAT should they meet thresholds. Representatives of the trade have long argued that the use of TOMS by large app based operators created an uneven market. They say competitors were able to undercut prices not through lower costs or better efficiency, but through tax treatment that was never intended for urban taxi services.
McNamara, General Secretary of the Licensed Taxi Drivers Association (LTDA), has repeatedly described the practice as a loophole that damaged driver incomes and undermined the regulated London taxi model. In the video referenced by the Chancellor, he discusses what the change means for drivers working on the capital’s streets.
The Treasury estimates the reform will protect around £700 million in revenue and applies mainly to large London based private hire operators. Smaller firms outside London, where passengers contract directly with drivers, are not affected. Black cabs are also unaffected in terms of tax liability.
For the London taxi industry, the Government’s messaging marks one of the clearest political acknowledgements to date that tax policy has played a role in reshaping competition between taxis and private hire vehicles. While the change will not reverse wider shifts in passenger behaviour, trade bodies say it removes a structural disadvantage that has existed for years.
