‘TAXI TAX’ ON MINICABS: New survey reveals 70% of public saying they’d cut back on minicab use if VAT added to fares
- Perry Richardson
- 1 hour ago
- 3 min read
A new survey has issued a bleak warning to the Chancellor ahead of the Autumn Budget, suggesting that the introduction of VAT on private hire vehicle (PHV) fares could drastically reduce public use of minicabs across the UK.
The research, carried out by taxi insurance broker The Taxi Insurer, found that 70% of people would either cut back on or stop using PHVs if the proposed “taxi tax” is implemented. The measure is said to be under consideration by Chancellor Rachel Reeves, who is reportedly looking at ways to generate additional Treasury income.
Traditional taxi drivers are unlikely to be affected by the potential change as they would remain the principal booking agent responsible for the VAT added. However, private hire operators may be forced to add 20% VAT to pre-booked private hire licensed fares, increasing the cost of a typical £20 journey to £24 if the costs are passed onto the passengers.
David Sweeney, head of taxi broking at The Taxi Insurer, warned that such a move could make life even harder for the trade. “If VAT is added to PHV fares, there’s a danger it’ll make the drivers of those vehicles less competitive. Such a hike in fares could push customers away from using these services and towards public transport. In a trade where there seems to be little support from the government, this certainly wouldn’t help in what is already a very tough market.”
The Taxi Insurer’s survey data paints a picture of how damaging the impact could be. A third of respondents said they use PHVs at least once a week. Of those, 23% said they would slightly reduce the number of trips they make, 35% would cut back significantly, and 12% would stop using the service altogether if prices rose by 20%.
This would mark a major shift in travel habits across the country and could have serious consequences for PHV drivers and operators. Many drivers already face high operational costs linked to commission fees, fuel prices, insurance, and vehicle maintenance. A further drop in demand could see incomes fall, forcing some to leave the industry altogether.
The report also highlights that certain groups of passengers would be disproportionately affected. People who rely on PHVs for essential daily travel, particularly in rural areas with limited public transport, could find themselves priced out of vital journeys. More than a quarter of those surveyed said they depend on minicabs for their weekly shop, 15% use them for medical appointments, and one in ten parents rely on them for school runs.
Any reduction in affordable PHV access could place more strain on local authorities. Councils already spend around £1.5 billion each year on transport for pupils with special educational needs, and a rise in PHV costs could push these figures even higher.
The hospitality industry also stands to lose out. Nearly a third of people surveyed said they use PHVs to travel to social events, restaurants, or pubs. Rising fares could discourage people from going out, adding pressure to a sector that has struggled with staff shortages, rising costs, and slower post-pandemic recovery.
David Sweeney also raised concerns that the Budget could bring an additional financial blow for the wider driving community. “A bigger concern for drivers in general is that a hike in insurance premium tax could be next,” he said. “It has increased slowly over the years, from 5% in 1999 to 12% in 2017, where it has remained ever since.”
Industry figures argue that such increases would compound existing financial challenges for drivers, particularly at a time when many are transitioning to electric vehicles and facing higher upfront costs for compliance with clean air regulations.
The proposed “taxi tax” has yet to be confirmed, but trade representatives are urging the Chancellor to reconsider. The Autumn Budget is scheduled for 26 November, and the PHV industry will be watching closely for any sign of confirmation.
