Is There VAT on Taxi Fares?
Are you wondering if VAT applies to taxi fares in London? Although this hasn’t always been clear in the community. Well, let’s put it simply so you know what to expect when you take a taxi.
Is There VAT on Taxi Fares?
VAT on taxi fares in London can be a bit confusing. Officially, there is a 20% VAT charge on taxi fares. However, whether you actually have to pay this VAT depends on a few things, such as whether the driver is VAT-registered or the company’s policy.
Who Charges VAT?
The key factor here is whether the driver or taxi company is VAT-registered. Here’s how it works:
- Self-employed drivers: If a driver owns or rents their cab and earns below £85,000 a year, they don’t have to register for VAT. That means they won’t charge you VAT on your fare.
- Taxi companies: If a driver works for a larger taxi company, then VAT might be added to the fare.
- Mixed companies: Some companies have both employed and self-employed drivers, so some rides might include VAT and others might not.
The £85,000 VAT Threshold
If a driver’s income is less than £85,000, they do not need to register for VAT. Most self-employed drivers fall into this category, so they do not charge VAT on their fares. This means they can be slightly cheaper than the larger taxi companies, who do have to charge VAT.
Are Black Cabs Different?
No. It all depends on whether the driver is VAT-registered or not. If the driver is not VAT registered, no VAT will be charged on the fare.
How Do You Know If You’re Paying VAT?
Want to be sure if VAT is included? It’s simple:
- Ask for a VAT receipt. It will clearly show if VAT has been charged. Most passengers don’t ask, which leads to some confusion.
Changes Might Be Coming
All taxi companies will soon have to charge VAT, whether they want to or not, it is said. The government plans to hold a public consultation on the matter in April 2024.
If this happens, taxi fares could rise by up to 20%. This could mean passengers paying more and could be difficult for smaller taxi operators.
What Does This Mean for You?
- Different fares: You could see different prices for the same trip depending on whether the driver charges VAT.
- Price hikes: If the new rules come in, taxi rides could cost more.
- Always ask: Don’t hesitate to ask if VAT is included. It can make a difference, especially if you’re on a budget.
Tips for Getting the Best Deal
Here’s how you can navigate VAT and save on taxi costs:
- Compare fares: Check prices with different companies, as some might not charge VAT.
- Ask about VAT: When booking, ask if the price includes VAT.
- Keep receipts: Handy for business trips or if you need to claim expenses.
My Final Thoughts
Taxi fares and VAT fares in London have been changed. Transport for London (TfL) has increased fares 1, 2 and 3 by 8.92% from 20 April 2024. This increase has been made taking into account operating costs and the national average income of taxi drivers.
If VAT becomes mandatory for everyone, this could lead to higher fares, as businesses will have to adjust their fares to cover their costs. This will also affect passengers who will feel the increased costs.
When planning your trip, always be aware of the updated fares and fares. All taxi companies offer reliable, affordable and comfortable journeys. If you are looking for airport transfer services, check out our Gatwick Airport Transfer Services or Heathrow Airport Transfer Services. We are always ready to make your journey hassle-free.
