Reeves Faces Backlash Over Plans to Add VAT to Taxi Fares

Rachel Reeves is facing a backlash over plans for a so-called ‘taxi tax’

Chancellor Rachel Reeves is under pressure after proposals to extend VAT to taxi and private hire fares sparked warnings that the move would disproportionately impact rural communities and vulnerable passengers.

Campaigners say the measure could drive up costs for people who rely on cabs to access essential services, particularly those living in areas with limited public transport. Concerns have also been raised about the effect on the NHS, which currently spends around £460m a year on private hire and taxi journeys for non-emergency medical appointments.

At present, most drivers outside London do not charge VAT because they are classed as self-employed and earn below the £90,000 threshold. The Treasury is now consulting on whether to standardise the system by imposing VAT at the full rate across the sector.

The taxi industry has warned the change would lead to higher fares and squeeze small operators. The Stop the Taxi Taxcampaign has described the proposal as a breach of Labour’s pledge not to raise VAT.

Michael Solomon Williams, of the Campaign for Better Transport, said:“Taxis and private hire vehicles are a vital part of the transport network for people in rural areas, those who cannot drive, and passengers needing accessible door-to-door services. Rather than taxing these journeys, the government should be making public transport more affordable and accessible.”

Treasury minister Dan Tomlinson said earlier this month that ministers “take this complex issue very seriously and recognise businesses’ need for certainty.” A full response to the consultation is expected alongside Reeves’ autumn Budget on 26 November.