Rachel Reeves is under mounting pressure from the private hire sector to rule out proposals to impose a 20 % VAT on private hire journeys - a measure which has been dubbed the "Taxi Tax". Industry figures have urged her to confirm that fares will not be subject to the higher rate ahead of the Autumn Budget on November 26.

In an open letter, 59 private hire operators from across the UK warned that applying the tax to all private hire vehicle (PHV) fares would drive up costs for millions of passengers, force many driver-partners out of work, and threaten the survival of hundreds of small and medium-sized British operators. They also claim doing so risks harming local economies and the night-time economy, which is heavily reliant on affordable transportation.

The nickname Taxi Tax is actually misleading, as only Hackney Carriages are officially classified as taxis; the proposed VAT would apply solely to private hire vehicles. Regardless, operators argue that working families and those outside major cities would be hit hardest - especially in Wales, the South West and the East of England, where public transport is limited.

Within some networks, more than half of journeys are for essential purposes such as healthcare, education and commuting, with leisure trips representing only a small share.

Even modest fare increases, they argue, would disproportionately affect people who rely on PHVs for everyday mobility.

The Treasury's consultation on VAT closed in August 2024, but no formal response has been published. Industry leaders say the ongoing uncertainty is already discouraging investment in a sector that supports around 265,000 licensed private hire drivers and provides millions of journeys each day.

The letter follows the Supreme Court's unanimous ruling in Delta and Veezu v Uber on July 29, 2025, which confirmed that private hire operators regulated under the 1976 Miscellaneous Provisions Act may operate under different business models - as agents, principals or intermediaries.

While that decision provided long-awaited legal clarity, operators fear the proposed VAT change could undermine the progress it represented.

Nathan Bowles, chief executive of Veezu - the UK's largest private hire technology business - said: "Private hire vehicles keep Britain moving, connecting communities that rely on us for essential journeys, and a 20% VAT hike would hit the elderly, disabled and rural passengers hardest.

"Operators across the country are urging the Government to confirm that PHVs will not be subject to this tax. Without reassurance, businesses cannot plan or invest, and every month of uncertainty erodes one of Britain's most essential transport services."

So far, the Government has offered little in response. Treasury ministers have declined to rule out VAT on fares, saying only that they "take this complex issue very seriously" and will publish a detailed response "in due course."

Rachel Reeves has been vocal elsewhere about the Government's transport priorities. In June 2025 she announced a £15.6billion investment in local transport outside London - the largest ever by any British government - declaring that "a Britain that is better off cannot rely on a handful of places forging ahead of the rest."

However, on the VAT question, she has so far remained silent, offering neither confirmation nor denial that private hire journeys will be exempt from the 20% rate.

The industry insists that swift clarity from Ms Reeves is now vital. Without it, operators fear the "Taxi Tax" could stall investment, increase fares and limit essential transport access for communities across the country.