Uber Faces Potential Driver Exodus Amid New Tax-Driven Contract Changes

Uber is confronting the possibility of a driver exodus after rolling out a new contractual model designed to navigate VAT obligations following changes to UK tax law.

Some drivers have indicated they may leave the platform for rival apps or return to traditional black cab work.

The changes follow the removal of the Tour Operators’ Margin Scheme (TOMS), which came into effect on 2 January. TOMS was a niche tax break that, according to Treasury estimates, would have generated around £700 million per year if closed.

Documents and messages circulating among drivers reveal growing frustration:

• Drivers have accused Uber of turning them into “tax collectors” under the new model.

• Calls for a mass log-off and protests outside Parliament are reportedly circulating.

• Many drivers are exploring alternative platforms or local minicab firms.

  
  

Uber’s Position

Despite the unrest, Uber maintains the update is necessary to align with standard UK private hire practices:

• The company has shifted to an agent business model, acting as a booking agent rather than a principal transport provider.

• VAT now applies only to Uber’s service fee, rather than the full fare.

• This structure keeps fares competitive, as most drivers earn below the £90,000 VAT threshold, preventing a potential 20% fare increase.

  
  

Uber emphasizes that the change does not alter drivers’ take-home pay:

• The proportion of the fare retained by Uber remains unchanged.

• Variable commission rates have not been introduced due to the model change.

• Dynamic service fees (which can drop to as low as 3% in off-peak times) are part of Uber’s marketplace system designed to balance supply and demand.

  
  

Benefits for Drivers

Uber highlights the protections and benefits for drivers under its ‘worker’ classification, established through an agreement with the GMB Union:

• Guaranteed national living wage.

• Holiday pay calculated at 12.07% of earnings, paid weekly.

• Pension contributions from Uber.

• Access to free sickness and injury protection, parental payments, and free university courses.

• Weekly earnings summaries clearly show how fares are split between drivers and Uber.

  
  

An Uber spokesperson said:

“The vast majority of total fares go directly into drivers’ pockets. We are proud that thousands of drivers continue to make the positive choice to work on Uber as passenger demand continues to grow.”