The cost of Uber and other cabs services could increase by more than 15 per cent if the Chancellor pushes ahead with plans for a ‘taxi tax’ in the upcoming Budget.
Labour is considering imposing 20% VAT on all private hire vehicle journeys when it announces its next Budget later this month.
But campaigners say the move would leave vulnerable people such as the elderly and domestic abuse victims at risk if they are unable to afford a taxi.
Bosses at Uber, Bolt and Veezu – the three biggest ride-hailing apps in Britain – have written to Rachel Reeves urging her to think again.
In a joint letter, the executives said: ‘We are united in urging you not to impose an inflationary VAT increase that would hit vulnerable passengers by driving up the cost of fares for transport services which are an essential lifeline.
‘Fares would rise dramatically to cover the cost of a VAT hike. The impacts of this would be felt acutely by those who rely on minicabs and private hire vehicles in their daily lives.’
They added: ‘People with mobility issues and the elderly will become more isolated from their communities and find it harder to get to the shops and essential appointments, as they struggle with rising costs.
‘Women’s groups, such as the Survivors Trust, have sounded the alarm too, warning the taxi tax would cause more people, especially women, to take risks with their safety.’
Vulnerable customers such as the elderly and women travelling at night could be the worst affected
Fay Maxsted OBE, chief executive of The Survivors Trust, said: ‘Many people rely on taxis to get home safely after an evening out, especially during nighttime when women in particular can feel unsafe and at risk of sexual assault.
‘Our frontline workers, who provide essential services, also rely on taxis for safe transportation during night shifts.
‘We urge policymakers to prioritise safety and ensure transportation is accessible to those who need it.’
Private hire operators like Uber and Bolt do not pay VAT as the drivers themselves are defined as self-employed contractors and do not meet the earnings threshold of £90,000 a year.
But in a 2023 High Court legal battle, it was ruled that taxi firms, not drivers, held the contract with passengers – meaning that the taxi company would be liable for VAT.
Most black cab journeys won’t be subject to VAT since the drivers are self-employed and do not meet the earnings threshold, while booking apps do vastly exceed the earnings threshold.
Apps and ride-hailing companies say that if tax is hiked in the next budget, potentially vulnerable customers will be forced to foot the bill.
HMRC had a consultation on the issue in he summer of 2024 and has said it will respond at the next budget.
The Treasury said: ‘We are reviewing feedback from our recent consultation and will publish our detailed response shortly.’
