Transport Secretary confirms Plug-in Taxi Grant to end and no wheelchair VAT relief likely for electric black cabs

The Transport Secretary has confirmed that the Government’s Plug-in Taxi Grant (PiTG), a key scheme supporting the switch to zero-emission capable (ZEC) taxis, will close at the end of the current financial year or once its remaining budget is exhausted.

In a letter to London Assembly Member Elly Baker, Heidi Alexander said the grant had “provided vital support to the development of the zero-emission capable taxi market”, helping more than 10,000 vehicles onto UK roads, with around 9,000 of those operating in London. The programme has been instrumental in helping drivers make the transition to the LEVC TX and other ZEC models since its introduction in 2017.

Alexander said the decision to extend the grant only at a reduced rate reflected the Government’s attempt to balance continued support for the taxi trade with “value for money for the taxpayer”. She wrote: “Extending the PiTG at a reduced rate balances support for the ZEC taxi market and UK automotive industry. It also provides value for money for the taxpayer. The grant will close at the end of the financial year or when budgets have been exhausted, whichever comes first.”

The letter signals the winding down of direct Government financial support for drivers adopting zero-emission capable taxis, a move likely to concern trade representatives who argue that ongoing incentives remain essential to encourage investment in expensive electric vehicles.

Alongside the PiTG update, Alexander also addressed questions raised by the Assembly about VAT treatment for wheelchair accessible taxis. She said the issue was a matter for His Majesty’s Treasury but added that the Government remained committed to ensuring appropriate support for disabled passengers.

“Certain products designed solely for use by a disabled person can qualify for a zero rate of VAT,” she wrote. However, she made clear that VAT relief for taxi purchases was unlikely, given the broad scope of the tax and its significance to public finances. “VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. VAT is the UK’s third largest tax, forecast to raise £180.4 billion in 2024/25.”

The Transport Secretary said any further VAT exemptions would need to be “balanced against affordability considerations” and that the Government had to ensure new reliefs represented good value for money. She added that in many cases, “businesses only partially pass on any savings from lower VAT rates”, meaning the intended benefit to consumers may not fully materialise.

The letter closes by reaffirming the Government’s intention to support a cleaner taxi fleet through wider regulatory reform rather than new direct subsidies. However, for many in the trade, the end of the PiTG will mark the conclusion of one of the most effective incentives in helping London’s iconic taxi industry move away from diesel and towards cleaner, modern vehicles.