New VAT rules for private hire

by Aitch, posted in Value Added Tax

It was announced as part of the Autumn Budget 2026 measures that the government will introduce changes to the VAT treatment of passenger transport services supplied through taxi and private hire vehicle (PHV) operators. The changes will take effect from 2 January 2028.

Under the new rules, qualifying private hire vehicle operators will be treated as making the supply of transport services to passengers, rather than acting as agents for individual drivers. This means that operators will have to account for VAT on the full value of the fare, rather than just any commission or fees they charge.

The changes aim to create a more consistent VAT treatment across the private hire industry. In London, private hire vehicle operators are already required to act as principals and account for VAT on the full fare. However, outside London, private hire vehicle operators can act as agents, with drivers responsible for accounting for VAT on fares where they are VAT registered. The new rules will help create a more level playing field between larger operators.

The measure will apply only to larger businesses whose annual fare turnover exceeds a specified threshold. The government will consult on the threshold, with a £50 million annual fare turnover currently the lead option. Smaller operators will therefore be unaffected.

Source:HM Revenue & Customs | 02-11-2026
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Aitch
I'm Aitch, the Founder and CEO of CIGMA Accounting Ltd. As a Chartered Management Accountant and as a CIMA member, I've spent more than 16 years helping businesses, entrepreneurs, landlords, and individuals with tax planning, accounting, and HMRC compliance. As a chartered accountant in London, I'm passionate about making complex tax matters easier to understand and helping clients make confident financial decisions. Over the years, I've advised start-ups, SMEs, established companies, and high-net-worth individuals across a wide range of tax and accounting matters. My expertise includes Corporation Tax, Self-Assessment, Capital Gains Tax, Inheritance Tax planning, R&D tax relief, capital allowances, international tax, and resolving complex HMRC compliance issues. Whether clients need a business accountant, tax accountant, or strategic tax advisor, my focus is always on delivering practical advice that creates long-term value. One of my specialist areas is Making Tax Digital (MTD). I've worked extensively with businesses preparing HMRC's digital reporting requirements, helping them move to cloud accounting, improve financial processes, and adopt technology that makes compliance more efficient. I regularly speak at Making Tax Digital roadshows, industry events, and educational sessions in collaboration with Zoho Books, sharing practical insights into digital accounting, tax legislation, and the future of the profession. Many business owners looking for the best accounting firm in London are not simply searching for an accountant they're looking for trusted advice, responsive support, and long-term value. That's the approach I've taken in building CIGMA Accounting. My team and I work closely with businesses across London and the UK, providing accounting services, tax advisory, bookkeeping, payroll, VAT, company accounts, and strategic tax planning tailored to each client's goals. Through this website, I share practical guidance on UK taxation, Making Tax Digital, HMRC updates, Corporation Tax, Self-Assessment, and business finance. My aim is to provide reliable, straightforward information that helps business owners understand changing regulations, reduce compliance risks, and make informed financial decisions with confidence.
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