Posted on the 6th January 2026 in PHTM News

UBER REWRITES CONTRACTS WITH DRIVERS OUTSIDE LONDON TO AVOID PAYING MILLIONS OF POUNDS TO EXCHEQUER

Uber has rewritten driver contracts outside of London, effectively swerving millions of pounds in VAT liabilities following the implementation of the government’s new “taxi tax.”

The move came as the rule announced in November’s budget, that private hire vehicle operators such as Uber and other ride hailing apps will no longer be able to use the Tour Operators Margin Scheme to significantly reduce the VAT they pay on fares, came into effect in January.

Uber’s change to the terms with its drivers has been expected since the budget announcement.

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.”

The updated terms issued to Uber drivers from January 2026 has changed the relationship between the company and drivers - the technology firm will now act as an agent, rather than as the supplier, of transport services outside London.

Uber stresses that its new way of working with drivers is a well-established model used by many private hire operators across the industry and that the company is aligning to follow suit.

UBER DRIVERS OUTSIDE LONDON: Under the “agency model”, drivers make a contract directly with their passengers – making it their responsibility to charge any vat due on the fare, while Uber acting as the 'booking agent' only adds vat on its commission.

HOWEVER, as most drivers DO NOT earn more than the VAT threshold of £90,000 in bookings a year, they do not need to be VAT registered and so DO NOT have to charge VAT.

Therefore, the majority of Uber fares outside London WILL NOT become more expensive, since the 20% vat will not apply.

As fares outside of the capital are believed to account for roughly half of Uber’s £5.2billion in UK revenue last year, this means a sizeable chunk of the company’s revenue will avoid VAT liability.

UBER DRIVERS IN LONDON - TfL: The new contracts do not relate to London, where the agency model is not allowed under Transport for London rules. As a result, Uber passengers in the capital will pay VAT on their fares.

While the government maintains that ending "niche tax schemes" will benefit "everyday cabbies" and fund national priorities like cutting NHS waiting lists, the Treasury has yet to confirm if Uber’s contractual maneuver will undermine its projected £700 million annual windfall.

An HM Treasury spokesperson stated the change was designed to create a "fairer tax system," though they did not comment specifically on Uber’s bypass of the supplier model outside the capital.


Read another story