New VAT rules for private hire operators start January 2026
New VAT rules for private hire vehicle (PHV) operators will take effect from 2 January 2026. The changes will alter how tax is calculated, depending on whether firms act as principals or agents. Operators outside London will also gain more flexibility in choosing their business model under the updated regulations.
Currently, PHV operators acting as disclosed agents pay VAT only on their commission. This will remain unchanged after the new rules come into force. However, those operating as principals—or undisclosed agents—will now face VAT on the full fare, not just their profit margin. The shift significantly increases their tax burden.
The updated VAT system will apply from 2 January 2026, with different rules for principals and agents. Operators must now decide which model suits their business best. Those acting as principals will see a notable rise in tax liability, while agents retain their current VAT treatment.
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