The UK Government has announced that from January 2026, all private hire fares will be subject to the full 20% VAT rate. This change affects every operator, including Uber, Bolt, FREE NOW, Ola, UKride, and local minicab firms. It could influence fare prices, driver earnings, and overall demand across the UK. Drivers are understandably concerned about how this shift will impact their income and day-to-day work.
Today, we explain the new VAT rule, what it means for PCO drivers, and how Zoom PCO Hire can help you stay financially secure with flexible PCO car hire and a rent to buy option with guaranteed weekly airport jobs.
What Is the New 20% VAT Rule for Private Hire Fares?
Explanation of the VAT Change
From January 2026, all private hire operators in the UK must charge the full 20% VAT on every fare. Until now, many operators used the Tour Operators’ Margin Scheme (TOMS), which allowed VAT to be applied only to the operator’s commission or margin, not the full fare. This helped major platforms and smaller minicab firms reduce their VAT liability.
Under the new legislation, TOMS will no longer apply to private hire vehicle (PHV) operators. This means that companies such as Uber, Bolt, FREE NOW, Ola, as well as local minicab firms and independent operators, must apply VAT on the total fare paid by the passenger.
This updated VAT structure will affect pricing, platform fees, and, ultimately, driver earnings across the UK.
Why the Government Is Making This Change
The main reason behind this update is to standardise VAT treatment across the taxi and private hire industry. TOMS was originally designed for travel businesses, not ride-hailing platforms. Over time, it created inconsistencies between black cabs, private hire firms, and app-based operators.
By removing TOMS for private hire services, the Government aims to close legal loopholes that allowed operators to pay much less VAT than traditional taxi services. The updated approach reflects how modern ride-hailing platforms operate, especially in cities like London, where PHV demand is high.
This shift may create challenges for operators and drivers. Still, it also establishes a clearer, more consistent regulatory framework for the future.
How the VAT Change Will Affect PHV Drivers in the UK
Higher Fares for Passengers
- Major platforms like Uber and Bolt are likely to increase fares to cover the 20% VAT addition.
- Higher prices may discourage some passengers, especially during non-essential or short trips.
- Off-peak demand may drop as customers switch to public transport or postpone travel.
- Price-sensitive areas outside London may experience a stronger decline in ride bookings.
- These changes may create more variability in passenger behaviour across weekdays and weekends.
Potential Drop in Driver Earnings
- If operators choose not to raise fares, they may absorb VAT by lowering driver commissions.
- Drivers could see smaller payouts per ride, particularly during periods of low demand.
- More drivers may compete for the same number of bookings on Uber, Bolt, or FREE NOW.
- Surge pricing may become less predictable as platforms adjust to VAT-related costs.
- Based on previous fare changes in the industry, a period of adjustment is expected.
Pressure on Small Operators
- Smaller local minicab firms often operate on thin margins and may struggle to absorb VAT.
- Some operators may increase fares but risk losing customers to larger platforms.
- In extreme cases, firms may downsize or exit the market, reducing operator diversity.
- Drivers working with small firms may see reduced job availability or fewer pre-bookings.
- The industry may shift towards consolidation, favouring larger app-based companies.
Increased Uncertainty for New PHV Drivers
- New drivers may find it harder to reach weekly earning goals during the early adjustment period.
- Income may fluctuate more compared to the stable conditions seen before the VAT change.
- Drivers entering the industry with higher running costs may feel additional pressure.
- Consistent work becomes more valuable, especially during quieter weeks or slow seasons.
- Support programmes and guaranteed job opportunities will play a key role in income stability.
Driver Concerns and Risks After the 20% VAT Change
With the new 20% VAT rule coming in 2026, many PCO drivers across the UK are worried about how it will affect their weekly income and job stability. Common concerns include earnings, commissions, passenger demand, and whether PCO hiring will remain affordable.
Questions Drivers Are Asking
- Will I earn less after VAT is added to fares?
- Will Uber, Bolt, or FREE NOW reduce my commission?
- Will customers book fewer rides if prices go up?
- How will my PCO hire costs compare to my weekly earnings?
- Will demand drop during quieter hours?
These are valid concerns, especially for full-time drivers.
Real Risks Drivers Should Expect
- A short adjustment period as operators update fare structures.
- Possible changes to commission or bonuses on major apps.
- Fluctuations in ride demand, especially for shorter trips.
- New or part-time drivers may find it harder to meet weekly targets.
- Some smaller minicab firms may reduce work availability.
Why Drivers Shouldn’t Panic
There are practical ways drivers can stay financially stable even during industry changes:
- Drivers who work across multiple apps usually maintain a consistent weekly income.
- Using fuel-efficient, hybrid, or electric PCO cars helps reduce running costs.
- Drivers with guaranteed work, such as airport jobs, are affected far less by fare fluctuations.
- Flexible rent-to-buy plans reduce long-term financial pressure.
Based on previous fare adjustments in the PHV industry, a period of change is expected. Still, drivers who prepare early and take advantage of stable earning opportunities often recover quickly.
How Zoom PCO Hire Supports Drivers After the 20% VAT Changes
As the industry prepares for major changes, drivers need support systems that protect their earnings and provide stability. The upcoming 20% VAT rule makes it even more important for PCO drivers to choose a partner that provides steady income, fuel-efficient vehicles, and flexible rental options. At Zoom PCO Hire, we offer all of this through our PCO car hire, rent-to-buy plans, and the Work & Earn Program.
1. Guaranteed Weekly Airport Jobs (Work & Earn Program)
- Every driver in our Work & Earn Program receives two guaranteed airport jobs each week, helping to ensure consistent income.
- These long-distance airport trips yield higher earnings than short city rides.
- Guaranteed jobs reduce dependence on fluctuating demand in other ride-hailing apps.
- This structure helps drivers stay profitable even as fares and commissions adjust to the new VAT rule.
2. Uber-Approved, Fuel-Efficient PCO Cars
- We provide a wide selection of Uber-approved electric, hybrid, and fuel-efficient petrol PCO cars.
- EV and hybrid options help drivers reduce running costs, especially as fuel prices and fares change.
- Fuel-efficient vehicles mean more miles with less expense.
- Our cars meet all Transport for London licensing standards.
3. Weekly Hire or Rent-to-Buy Options
- Drivers can choose flexible weekly hire plans or long-term rent-to-buy options based on their income and preference.
- No credit check is required, making it easy for new or returning drivers to get started quickly.
4. Lower Upfront Costs During an Uncertain Market
- Our plans require a low deposit, helping drivers get started without large upfront expenses.
- Immediate onboarding lets drivers start earning sooner.
- This is ideal for new drivers or those adjusting to the post-VAT environment who want to avoid high financial commitments.
5. Full England Coverage
- Zoom PCO Hire supports drivers across the entire England, not just London.
- Drivers near Heathrow, Gatwick, Birmingham, Manchester, and other major hubs can easily access our cars and take advantage of the opportunities they offer.
- National coverage ensures drivers outside London are also supported during the VAT transition.
Final Thoughts
The 20% VAT change will bring big adjustments to the private hire industry, but drivers who prepare early can stay ahead. By choosing the right car, managing running costs, and securing reliable work, it’s still possible to earn confidently in 2026 and beyond. Zoom PCO Hire is here to support drivers through this transition with flexible PCO car hire, rent-to-buy options, and guaranteed weekly airport jobs through our Work & Earn Program. If you want a steady income and a dependable car during a changing market, now is the right time to plan. Start your journey today and drive confidently with Zoom PCO Hire.
Frequently Asked Questions
What is the new 20% VAT rule for private hire drivers?
From January 2026, private hire operators in the UK must charge the full 20% VAT on all fares. Previously, some operators only paid VAT on their commission or margin. Under the new rule, VAT will apply to the total fare paid by the passenger, affecting rides booked through apps like Uber, Bolt, FREE NOW, and Ola, as well as local minicab firms.
Will rideshare apps reduce driver commissions after VAT changes?
It is possible. Each platform will decide how to handle the extra VAT cost. Some may raise passenger fares, some may absorb part of the cost, and others may reduce driver commissions or bonuses. Drivers should be prepared for commission structures and incentives on Uber, Bolt, and FREE NOW to change as the new VAT rules come into effect.
Will PCO drivers earn less once the VAT rule starts?
Earnings may be affected, especially during the initial adjustment period. If fares increase, ride demand could drop slightly. If commissions are reduced instead, drivers may receive less per trip. However, drivers who use multiple apps, control their running costs, and access guaranteed work, such as airport jobs, can still maintain strong weekly earnings.
How can drivers protect their income under the new VAT system?
Drivers can protect their income by:
- Working across multiple apps (Uber, Bolt, FREE NOW, Ola)
- Using fuel-efficient, hybrid, or electric PCO cars to cut running costs
- Choosing flexible hire or rent-to-buy plans instead of heavy finance
- Joining programmes that offer guaranteed weekly work, such as airport jobs
Planning and reducing unnecessary expenses will make a big difference.
How does Zoom PCO Hire’s Work & Earn Program help during VAT changes?
Zoom PCO Hire’s Work & Earn Program helps drivers stay stable by:
- Providing two guaranteed airport jobs every week
- Supplying Uber-approved PCO cars for hire or rent-to-buy
- Offering flexible plans with low upfront costs and no credit-check options
This gives drivers predictable income on top of their Uber, Bolt, or FREE NOW work, which is especially valuable when fares, demand, and commissions are changing.
Which PCO cars are best for reducing costs after the VAT increase?
The best PCO cars in a VAT-affected market are:
- Hybrids like the Toyota Prius or the Hyundai IONIQ
- Electric vehicles such as the MG5 EV or Nissan
- Fuel-efficient petrol models with low running costs
These cars help drivers save on fuel and maintenance, so more of what they earn stays in their pocket, even if fares and commissions are adjusted.
Can drivers still earn a full-time income after the VAT increase?
Yes, drivers can still earn a full-time income after the VAT increase, but they may need to be more strategic. Working with multiple apps, choosing efficient vehicles, driving at busy times, focusing on airports and long trips, and using support programmes like Zoom PCO Hire’s Work & Earn can help maintain or even grow weekly earnings.
Do new PCO drivers need to worry about the VAT changes?
New PCO drivers should be aware of the VAT changes, but they do not need to panic. The industry will adapt, and passengers will still need transport. What matters most is starting with:
- A cost-effective PCO car
- A realistic earning plan
- Access to reliable work, such as guaranteed airport jobs
Joining a supportive fleet partner like Zoom PCO Hire can make starting much safer and smoother.
Will minicab firms be affected differently from Uber and Bolt?
Yes. Smaller minicab firms often have lower margins and less flexibility than big apps. They may find it harder to absorb VAT and could be forced to raise fares or reduce driver pay. Larger platforms like Uber and Bolt have more data and tools to adjust pricing and incentives. However, the impact will still be felt across the whole industry.
Will VAT apply to airport trips, long-distance jobs, or pre-booked rides?
Yes. The 20% VAT rule applies to airport trips, long-distance rides, and pre-booked journeys provided by a VAT-registered private hire operator. The exact impact on pricing will depend on how each operator chooses to adjust their fare structure.
How will VAT affect surge pricing and busy-hour earnings?
Rideshare platforms may adjust how they use surge pricing to balance VAT, passenger demand, and driver earnings. Surge may still appear at busy times, but the exact surge amounts and frequency could change. Drivers should expect some variation in busy-hour earnings while platforms fine-tune their pricing models.
Should drivers switch to EV or hybrid cars before the VAT change?
Switching to an EV or hybrid can be a smart move, especially amid higher industry costs. These cars:
- Use less fuel or electricity per mile
- Often qualify for lower running costs
- Can be more attractive on platforms with “green” or “eco” categories
While it’s not mandatory, choosing a more efficient PCO car can help protect your profit margins after the VAT increase.
Will smaller minicab companies shut down because of VAT?
Some smaller minicab companies may struggle with the increased VAT burden, especially if they cannot raise fares or reduce costs. While not all will close, some may downsize, merge, or shift focus. Drivers working with smaller firms should consider having backup options, such as registering with larger platforms or joining a fleet that offers guaranteed work.
Does the VAT rule apply outside London in other UK cities?
Yes. The 20% VAT rule applies to private hire operators across the entire United Kingdom, not just London. Drivers in cities such as Birmingham, Manchester, Glasgow, Leeds, and others will also be affected. This makes it even more important for drivers nationwide to review their costs, income plans, and fleet partnerships ahead of 2026.
