London drivers face higher VAT obligations under government changes to TOMS.
From early January 2026, the UK government introduced a major change for London’s transport sector, targeting the niche VAT rule known as the Tour Operators’ Margin Scheme (TOMS).
Under TOMS, taxi and private hire operators only pay VAT on their profit margin rather than the full customer fare, reducing their VAT liability compared to the standard 20% rate. The Treasury has clarified that operators must account for VAT on the full fare for London journeys, prompting questions about the implications for drivers and passengers
The change has sparked concerns among industry stakeholders: Andrew Brem, Uber’s UK Regional General Manager, said:
“The government’s action 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.”
He later added guidance for drivers navigating the new rules:
“We recognise the addition of VAT is a change for London drivers and they might want to take tax advice on the implications for them…It will depend on individual circumstances but many drivers will now likely be better off if they register for VAT and, potentially, access the Flat Rate Scheme.”
For most private hire drivers, VAT registration is now likely to be beneficial, though individual circumstances will vary, and independent advice should be sought.
Beamin, a digital accountancy app supporting the self-employed logistics sector since 2023, are experts in driver tax and provide guidance to drivers on whether VAT registration is appropriate. Their support includes reviewing each driver’s personal circumstances to ensure they start on the best possible option.
Dan Richards, Director at Beamin, said, “Extending Beamin into the private hire industry is a significant milestone for us. Since launching in 2023, we’ve supported 28,000 self-employed drivers across the logistics sector, helping them navigate complex VAT and tax obligations with clarity and confidence.
The changes to TOMS represent one of the most significant shifts in London’s private hire market in years. For many drivers, VAT registration will no longer be a question of ‘if’, but ‘when’ – and getting that decision right from day one matters.
Our role is to ensure drivers understand their options, whether that’s standard VAT accounting or the Flat Rate Scheme, and to provide straightforward, tech-enabled support that protects their earnings and keeps them compliant. In times of regulatory change, clarity is power – and that’s exactly what we aim to deliver.”
Eazitax, specialists in private hire driver tax, also offer tailored support for operators adjusting to the new VAT rules. Gary Jacobs, CEO at Eazitax commented:
“London’s drivers have dealt with a lot of compliance changes over the years, but the end of the TOMs scheme is one of the most misunderstood. It doesn’t directly affect a driver’s take-home pay, but could result in less money in the driver’s pocket at the end of the day. How? The end of the TOMs scheme is likely to put up the price for passengers. Operators are likely to pass this on as they are forced to go back to the traditional VAT system, which eats into the drivers’ earnings.
In 2026, the VAT landscape for private hire is getting more complicated, not less. Drivers need advisers who understand the trade, and that’s exactly what our partnership with Beamin is designed to deliver.”
Under the new system, London driver fares will now be exclusive of VAT. VAT-registered drivers will receive 20% VAT from platforms on top of the agreed fare, while non-registered drivers will receive only the base payment.
Beamin and Eazitax have partnered to provide industry-leading technology and advice, helping drivers understand the implications of VAT registration and ensuring they can make informed decisions for their businesses.You can find out more about Beamin and the Eazitax service here.
