The UK Government is removing the Tour Operators’ Margin Scheme (TOMS) for private hire companies like Uber and Bolt. Currently, TOMS allows these operators to pay VAT only on their commission and protects many local firms.

From January 2026, private hire operators must pay 20% VAT on the full passenger fare. This shift is likely to shake up the entire industry.

Impact on Ride-Hailing Companies

This new policy will force private hire operators to make tough choices. They will either have to raise fares for passengers or absorb the tax themselves. 

This is a turning point in the private hire industry. You will need experts like Fleeto by your side to navigate this situation carefully. So, connect with us and stay on top of industry challenges.

Smaller operators are likely to feel the most pressure, as many of them used the TOMS scheme to stay competitive. The new VAT policy will affect their current operating model. They will likely pass some costs down to drivers that will directly impact their daily earnings.

Industry Concerns

Local operators are likely to raise their fares, which may lower passenger demand. Private hire drivers could feel this change directly as they might get fewer ride requests. Off-peak hours could become quieter, but drivers who primarily focus on airport transfers may feel the biggest pinch.

These trips have higher fares. Passengers will notice the price increase, and they may choose cheaper travel options instead.

Source: https://dmnews.co.uk/private-hire-operators-to-pay-vat-on-all-fares-from-1-january-2026/