Is There VAT on Taxi Fares in the UK?

Taxi fares are a common mode of transportation for businesses which means the question of VAT on taxi fares is a common one, including whether you can claim VAT back on taxi costs and charges. This guide will explain the specific regulations regarding VAT (Value Added Tax) on taxi fares, including the applicable rates, the possibility of VAT reclaims, and the specific considerations for different taxi services.

So, if you have been left confused as a business owner on whether ‘is there VAT on taxi fares?’ here’s the simple answer: 

Yes, there can be VAT on taxi fares in the UK, which will be charged to passengers for taxi or private hire journeys at the standard rate of 20%. However, drivers (or the taxi business) will need to be registered for VAT for you to reclaim VAT charges. This means each taxi fare may or may not have VAT included. Make sure you obtain a receipt for each journey to check.

So, the short answer is yes there is VAT on taxi fares in the UK, but as with anything to do with the UK tax system it is a bit more complicated than that. 

This can be a complex area if you operate as a driver of a taxi or private hire car so make sure you read the HMRC full guidance on how vat applies to taxis and private hire cars (VAT Notice 700/25).

We have covered various scenarios below to help you understand when there is VAT on taxi fares.

Handy Hint: We recommend that you always keep any travel receipts to help you process your business expenses properly.

What is the VAT rate for taxis in the UK?

The VAT rate for taxi fares in the UK is generally set at the standard rate of 20%. This means that 20% VAT is added to the total fare charged by the taxi service provider.

There are specific rules that apply to taxis and private hire cars. Private hire cars from a VAT perspective are often referred to as mini cabs.

The fares charged to passengers for taxi or private hire journeys are liable to VAT at the standard rate. Tips voluntarily given are not regarded as payment for a supply and are outside the scope of VAT i.e., you cannot reclaim VAT on a tip paid to the taxi driver.

Whilst this may seem straight forward it does get a bit more complicated depending on whether the taxi driver is self-employed, employed through the taxi firm or use the agency services of a taxi business.

Can you claim VAT on taxi fares?

In most cases, individuals and businesses cannot claim back VAT on taxi fares for personal use. However, if the taxi service is used for business purposes, such as traveling to a business meeting or transporting clients, the VAT incurred on those fares may be recoverable as input tax, subject to the normal VAT recovery rules.

The way in which the taxi driver operates could determine whether VAT is charged or not.  As such always get a receipt and look out for the VAT amount or VAT number as an indicator of whether you can reclaim the VAT or not.

HMRC VAT on taxi fares

The HM Revenue and Customs (HMRC) regulations stipulate that taxi fares are generally subject to VAT at the standard rate of 20%. Taxi service providers are required to account for and remit the VAT collected to HMRC if the driver is registered for VAT.

If the driver is not registered for VAT, then VAT is not applicable and you cannot reclaim VAT.

Are taxis VAT exempt or zero-rated?

Taxis fares in the UK are not exempt or zero-rated but are subject to the standard rate of 20%. However, certain specific transportation services, such as transportation for disabled individuals, may qualify for zero-rating under certain conditions. It is advisable to consult with HMRC or a tax professional for specific circumstances.

Whilst the standard rate of VAT is currently 20% it does not mean that all taxis fares will be inclusive of VAT as the driver may be self-employed and not VAT registered so it is important to get a copy of a valid receipt to ensure you are compliant in reclaiming the correct amount of VAT.

FAQs relating to business travel or VAT on taxi charges 

Is VAT charged on rail travel?

VAT is not generally charged on rail travel in the UK. However, there are some exceptions, such as first-class tickets and certain luxury or non-standard services, where VAT may be applicable. It is important to check with the specific rail service provider regarding the VAT implications for their services.

Train tickets are VAT zero, and not VAT exempt.

Domestic passenger transport in any vehicle, ship or aircraft that has at least 10 seats, including those for driver and crew can be zero-rated for VAT unless the supply is an exception from zero rates in which case it will be charged at the standard-rate VAT. 

This generally tends to be if the supply of transport includes the right to admission to a museum, theme park, zoo, or other places of entertainment.

Do not confuse exempt with zero-rated.  

Whilst they both may attract a £0 VAT charge, they are different.

When entering your train ticket purchases into your accounting records make sure to use the zero-rated option instead of exempt.

For further check out our article about VAT on train tickets.

Do you pay VAT on TFL?

Transport for London (TFL) provides various modes of transportation, including buses, trains, and the London Underground. While VAT is not charged on standard TFL services, certain non-standard or premium services, such as the Emirates Air Line cable car, may be subject to VAT.

The London Congestion Charge and the Ultra-Low Emission Zone (ULEZ) Charge are both outside the scope of VAT as non-business statutory levies imposed by Transport for London.

If you wish to know more read our guide to VAT on the congestion charge.

Does Bolt charge VAT in the UK?

Bolt, like other taxi service providers, is required to charge VAT on their fares in the UK. The standard rate of 20% VAT is applicable to Bolt taxi fares, and the company is responsible for complying with VAT regulations and remitting the collected VAT to HMRC.

Conclusion

In the UK, taxi fares are generally subject to VAT at the standard rate of 20%. While individuals and businesses typically cannot reclaim VAT on taxi fares for personal use, there may be opportunities to claim VAT on fares incurred for business purposes, subject to the relevant VAT recovery rules. 

It is important to understand the VAT implications of different taxi services, such as Uber fares or black cabs, and consult with HMRC or a tax professional for specific circumstances. 

Being aware of the VAT regulations surrounding taxi fares ensures compliance and accurate accounting for both taxi service providers and passengers.