VAT AND PAY-PER-MILE: Just how might the Autumn Budget impact the taxi and private hire sector?
- Perry Richardson
- 14 minutes ago
- 4 min read
The Chancellor’s Autumn Budget tomorrow is being watched closely across the UK’s taxi and private hire vehicle sector, with operators and drivers preparing for measures that could significantly alter the financial landscape of point-to-point transport.
The most contentious issue remains the prospect of a fare-based VAT change, widely described in the industry as a potential ‘taxi Tax’. Hackney Carriage drivers have supported the reworking of VAT obligations that they say would level the field with private hire platforms, while the PHV sector is pushing hard against any new tax burden that risks eroding passenger numbers.
Hackney Carriage representatives have long argued that inconsistent VAT treatment favours app-based operators, particularly those aggregating thousands of self-employed drivers beneath a single corporate platform model. There is an argument that a consistent VAT regime would close what they see as a structural pricing gap, especially in major cities where private hire services have grown rapidly. For many in the black cab trade, the Budget presents an opportunity to correct what they view as a longstanding imbalance. Any new policy that brings PHV fares into the VAT system could, in their view, reduce competitive friction and bring pricing structures closer together.
PHV operators and drivers see the situation completely differently. They warn that a 20 percent VAT on fares would force price rises, lower passenger volumes and ultimately suppress earnings. Larger platforms have already publicly signalled that any VAT change would feed directly into customer pricing. For many PHV drivers who rely on tight weekly margins, even a small fall in trip demand can have a disproportionate impact on take-home income. Platform-wide commission structures further complicate the picture, as drivers would shoulder the real-world consequences of lower customer activity while platforms pass the tax through to passengers.
Hackney Carriage drivers push for a fare VAT overhaul as PHV operators brace for new tax risks, rising EV costs and weaker leisure-sector demand.
Another Budget theme causing concern across both sides of the trade is the anticipated direction of travel on road taxation and electric-vehicle policy. A pay-per-mile duty for EVs has been openly debated within government circles, with figures of a few pence per mile previously floated in policy discussions. For taxis and PHVs, which are among the highest-mileage urban vehicles in the country, even modest charges could add up to substantial new annual costs. This sits uncomfortably beside the regulatory drive for fleets to move into zero-emission vehicles, which already come with higher upfront prices and more complex operating requirements.
Layered on top of this is the VAT differential for charging infrastructure, a long-standing issue in the industry. Public charging incurs a 20 percent VAT rate, while domestic electricity attracts only 5 percent. Many drivers, particularly those living in flats or terraced housing without home-charging options, rely heavily on public infrastructure. Any failure to address this disparity tomorrow would leave professional drivers continuing to pay a higher effective operating tax simply because of where they live.
The interplay of EV taxation, charging equality and fleet renewal incentives could shape medium-term investment decisions across taxi and PHV fleets. Operators already facing rising insurance premiums, inflationary vehicle costs and a tightening labour pool warn that a poorly balanced set of transport taxes could slow down electrification rather than accelerate it. For Hackney Carriage fleets, which often rely on more expensive purpose-built vehicles, the stakes are especially high.
Beyond direct taxation, the Budget is also expected to set the tone for the wider leisure and hospitality environment, a sector that heavily influences taxi and PHV trip volumes. If fiscal tightening leads to reduced support for high-street businesses, night-time venues, events and tourism-linked operators, passenger footfall could weaken. Many drivers rely on weekend evening trade, airport transfers, hotel traffic and seasonal visitor activity. Any squeeze on consumer spending or business rates relief for hospitality venues tends to feed directly into quieter ranks, longer waits and less predictable weekly earnings.
Private hire drivers has expressed particular concern that the cumulative effect of sector-specific measures could be overlooked. A VAT shift on minicab fares, an additional duty on mileage, the absence of relief on public charging and a contraction in discretionary spending all individually create pressure. Together, they risk reducing both revenue and job stability for thousands of drivers operating at the margins of financial sustainability. Some operators also warn of a possible reduction in service coverage, especially in rural and semi-rural areas where margins are already thin and demand falls away quickly when fares rise.
As the Budget approaches, industry associations, union groups and trade bodies remain divided in outlook. Hackney Carriage drivers expect clarity on VAT, hoping any structural reform will help tilt competition back towards licensed on-street services. PHV operators and drivers are preparing to respond to potential tax rises with cost modelling, fare adjustments and pressure campaigns warning of risks to passenger affordability. Both groups are watching closely for any commitments on EV charging equality or mileage duty timelines, which could materially affect investment decisions over the next five years.
Whatever emerges in the Chancellor’s speech, tomorrow is likely to mark a decisive moment for the UK’s ground surface transport market. The sector’s close ties to mobility policy, urban planning, consumer spending and net-zero delivery mean that even modest adjustments can have far-reaching operational consequences.
