Uber rewrites contracts with drivers to avoid paying UK's new taxi tax'

"Uber has swerved paying millions of pounds to the UK exchequer under Rachel Reeves's new taxi tax after the ride-hailing app rewrote contracts with its drivers. The move came as rules announced in November's budget took effect, which adjusted how VAT is payable on minicab fares and would have resulted in the whole Uber fare becoming subject to the 20% sales tax."

"However, updated terms issued to Uber drivers from January 2026 mean the technology firm will act as an agent, rather than as the supplier, of transport services outside London. The move means drivers make a contract directly with their passengers so they must charge any VAT due on the fare, while Uber only adds VAT to its commission. As most drivers are not thought to be making more than 90,000 in bookings a year,"

"At the time, Andrew Brem, Uber's regional general manager for the UK, said: The government's action today to change the rules will mean higher prices for passengers in London, and less work for drivers, when people are already struggling with the cost of living This decision also establishes the absurd situation where a trip in London will be taxed at a different rate than a trip anywhere else in the UK."

Rules from the November budget would have made entire Uber fares subject to 20% VAT. Uber updated driver terms from January 2026 so the company will act as an agent, not the supplier, for trips outside London. Drivers will contract directly with passengers and must charge any VAT due on fares, while Uber will only charge VAT on its commission. Most drivers are believed to book under £90,000 a year and therefore will not register for VAT, meaning most fares outside London will avoid the 20% tax. London remains excluded because Transport for London forbids the agency model.

Read at www.theguardian.com