John Healey pledges to introduce sweeping VAT changes for taxi firms

This would involve reforming how self-assessed income tax is collected, resulting in “smaller, more regular payments” rather than large bills.

Mr Healey told MPs that VAT rule changes would be introduced for larger taxi companies.

He said he would “resolve the question of VAT for larger taxi companies, ensuring they play by the same rules no matter where they’re located, while still protecting smaller, local firms”.

Budget documents state that the Government will deem the larger operators with annual fare turnover above a certain threshold liable for VAT.

This will mean operators earning above the threshold need to pay 20 per cent VAT on the full value of their fares from January 2, 2028.

Labour will launch a public consultation shortly to confirm the precise level of the threshold.

At present, £50million in annual turnover is the leading option, although this could change based on feedback.

The consultation will also be used to support final policy design and implementation.

The Office for Budget Responsibility’s economic and fiscal outlook document states that receipts have been revised down by £1.2 billion in 2026-27 compared to March.

It states that one-third of this is due to reduced receipts from some private hire vehicle operators changing their business models.

The OBR suggested that this was true for businesses outside of London since last year’s Budget to charge VAT on private hire vehicle operators.

Around £800million of VAT receipts is from new measures to increase VAT paid by PHVOs and locum doctors.

From 2028-29 onwards, Budget measures increase VAT receipts by £1.1billion each year.