VAT Registration Online in London: 2026 Update for Local Drivers

VAT registration online for London drivers is still done through GOV.UK, and the £90,000 turnover threshold has not changed. What changed in 2026 is the fare structure: from 2 January 2026, private hire operators in London can no longer use the Tour Operators' Margin Scheme, so many London drivers now have a real reason to think about registering for VAT even though they are well below £90,000.

This 2026 update covers only what is new for London drivers. It explains the platform rule change, how it affects your VAT decision, the new London cost pressures and what to do next. For the basic walk-through, read our existing guide to VAT registration online for London drivers and our UK VAT registration 2026 update.

Key takeaways

• The VAT registration threshold on GOV.UK is still £90,000 of taxable turnover; the 2 January 2026 change did not move it.
• From 2 January 2026, taxi and private hire journeys supplied by operators are excluded from the Tour Operators' Margin Scheme (TOMS), which GOV.UK says mainly affects private hire operators in London.
• GOV.UK says the change does not alter the tax obligations of individual drivers, but some drivers may choose to register voluntarily.
• Uber has said, as reported by trade press, that London driver pricing is now exclusive of VAT, so registered drivers receive 20% VAT on top. Check your own operator's terms and do not rely on this alone.
• Whether voluntary registration pays depends on your VAT-able costs, the scheme you choose and the admin you can handle, so run the numbers before applying.

What is VAT registration online for London drivers?

VAT registration online is the process of applying to HMRC (His Majesty's Revenue and Customs) for a VAT number through GOV.UK, using your Government Gateway sign-in. Once registered, you charge VAT where required, reclaim VAT on business costs and file VAT returns. London drivers can register compulsorily above £90,000 turnover or voluntarily below it.

What actually changed for London drivers on 2 January 2026?

From 2 January 2026, the law was amended so that taxi and private hire journeys no longer count as tour operator supplies for the Tour Operators' Margin Scheme. In practice, large private hire operators in London must account for VAT on the whole fare at the standard rate rather than on a narrow margin.

According to HMRC's policy paper on the change, the amendment to section 53 of the VAT Act 1994 takes effect from 2 January 2026. The paper says it mainly affects private hire vehicle operators, sometimes called minicab firms, and some taxi operators. Passengers may also be affected if fares change.

The government's news story on the change describes it as applying to private hire operators in London and says black cabs are not affected. It also explains why the scheme mattered: used by an operator, TOMS can cut the effective VAT rate to around 4%, compared with the standard 20%.

The government's consultation response on private hire VAT gives the longer background. It followed court disputes about whether operators act as principal or agent. Those disputes are why some platforms were treated as supplying the whole journey, and why the margin scheme became such a live issue.

Who is not affected?

The policy paper says journeys supplied directly by a driver to a passenger sit outside the change. A taxi hailed in the street is the example given. Journeys sold together with other specified travel services, such as part of a wider trip package, can still use TOMS. If you are unsure which category your work falls into, ask your operator and an accountant.

What GOV.UK does not tell individual drivers

The policy paper does not set out how each operator should word its driver contracts, and it does not say what a driver should do about registration. It states that the measure alters neither the processes nor the tax obligations of individuals. It adds that some private hire drivers may register voluntarily, but the measure is unlikely to increase the number of businesses that must register.

That last point matters. The headline rule is aimed at operators. Your decision as a driver is a separate commercial question about whether registering leaves you better or worse off.

Has the VAT registration threshold changed for London drivers in 2026?

No. According to GOV.UK's guidance on VAT registration thresholds, you must register if your taxable turnover is more than £90,000, and you can choose to register if it is lower. The 2 January 2026 rule affects how operators account for VAT, not the figure at which a sole trader must register.

The registration page on GOV.UK adds the timing rules. If you pass £90,000 over a rolling 12 months, you must register within 30 days of the end of the month in which you went over. If you expect to pass it in the next 30 days alone, you must register by the end of that 30-day period.

Most solo drivers earn well below that level, so for most the question is voluntary registration, not compulsory. Our threshold for VAT registration guide explains the rolling-12-month test in more detail.

Why are London drivers now asking about voluntary VAT registration?

London drivers are asking because the fare itself now carries VAT. If your operator adds 20% VAT on top of your trip payment when you are VAT-registered, registering can bring in extra cash that you then pay over to HMRC, less any VAT you can reclaim on costs. The decision turns on those costs.

Trade press reported that Uber UK's general manager said London driver pricing is now exclusive of VAT. Under that structure, VAT-registered drivers receive 20% VAT from Uber on top of the agreed trip payment, while unregistered drivers receive only the base payment. He also said many drivers may be better off registering, possibly using the Flat Rate Scheme, and that drivers should take tax advice.

Treat that as one operator's reported position, not as HMRC guidance. Your own contract and in-app terms decide what you are paid. We could not confirm the detail from a primary Uber document for this article, so check the current driver terms yourself.

What this means in plain English

If you are unregistered, you take the base payment and nobody asks you for VAT. If you register, you are paid VAT on top, but you owe that VAT to HMRC. You keep only the difference between VAT you collect and VAT you pay out or reclaim. That difference can be small, so registering is not a pay rise by itself.

Which VAT scheme could suit a London driver?

The two realistic options are standard VAT accounting and the Flat Rate Scheme. Standard accounting lets you reclaim VAT on business costs. The Flat Rate Scheme replaces that with a fixed percentage of your VAT-inclusive turnover. Which is cheaper depends mainly on how much VAT you pay on costs each quarter.

GOV.UK says you may be able to join the Flat Rate Scheme if your VAT turnover is £150,000 or less, excluding VAT. It also says you generally cannot reclaim VAT on purchases under the scheme, apart from certain capital assets over £2,000.

The rates matter. GOV.UK explains that a limited cost business pays a higher flat rate of 16.5%, and that a limited cost business is one whose spending on goods is below 2% of turnover, or under £1,000 a year if that percentage is exceeded. It also gives a 1% discount to businesses in their first year of VAT registration. Whether fuel, charging or vehicle costs count as goods for this test is a detail to check on GOV.UK or with an accountant before you rely on a rate.

How do you register for VAT online step by step in 2026?

You register for VAT online through the GOV.UK service, signing in with your Government Gateway details. You will need your business details, your National Insurance number, your bank details and an honest estimate of turnover. Allow time for HMRC to process the application before you rely on a VAT number.

1. Check the facts first: read GOV.UK's guidance on whether you must or may register, and compare your last 12 months of turnover with £90,000.
2. Work out your numbers: estimate the VAT you would collect and the VAT you could reclaim on fuel or charging, servicing, phone and equipment.
3. Decide your route: standard accounting or the Flat Rate Scheme, and note the 16.5% limited cost trader rule.
4. Gather your details: Unique Taxpayer Reference (UTR) if you have one, National Insurance number, business start date, bank account and turnover estimate.
5. Apply on GOV.UK using the register for VAT service and sign in with your Government Gateway user ID.
6. Tell your operator your VAT number only after HMRC issues it, and ask how and when they will start paying VAT on your trips.
7. Set up record keeping and software that works with Making Tax Digital for VAT, and diary your return dates.

This list is a 2026 sequence for London drivers weighing the decision, not a full registration manual. For screen-by-screen help, see our VAT registration online guide for London drivers and the general VAT for Uber drivers explainer.

How would VAT work for an unregistered and a registered driver?

Here is an illustrative example using an invented driver, with simplified figures. Assume a London driver is paid £3,000 a month in base trip payments and has £800 a month of costs that include 20% VAT. Real results depend on your costs, your scheme and your operator's terms.

• Unregistered: you receive £3,000. VAT on your £800 of costs is a cost to you, and you reclaim nothing.
• Registered, standard accounting: you receive £3,000 plus £600 VAT, so £3,600. You owe £600 output VAT, but you reclaim about £133 input VAT on the £800 of costs (£800 divided by 6). You pay HMRC about £467 and keep about £133.
• Registered, Flat Rate Scheme at 16.5% of the £3,600 VAT-inclusive turnover: you pay HMRC £594 and keep £6 of the £600 collected.

In this example, standard accounting leaves the driver roughly £133 a month better off before the cost of admin, return filing and any accountancy fee, because the driver can reclaim VAT on costs. The Flat Rate Scheme at 16.5% leaves almost nothing. A driver with very few VAT-able costs would see different figures again.

The example also ignores the risk that higher fares reduce demand, which the Uber comments in trade press raised as a possibility. Use our VAT calculator to test your own numbers, and remember that a driver with low costs may gain little from registering.

Do the new London cost changes carry VAT?

It depends on the cost. Many London driving costs are in the news, but whether you can reclaim VAT on them depends on whether VAT is charged on the supply and whether you hold a valid invoice. Do not assume a charge includes VAT; check each document, and confirm uncertain items on GOV.UK.

Congestion Charge

We could not load Transport for London (TfL) pages to confirm the current Congestion Charge. Press reports say the standard daily charge rose from £15 to £18 from 2 January 2026 and that the 100% electric vehicle discount ended in late December 2025, but we have not verified this against TfL. Check the current rate on the TfL website, and confirm with an accountant whether any VAT is shown on your receipt before reclaiming it.

TfL licence fees

TfL's Notice 05/26 says its taxi and private hire fees review is the first change since 2017, approved by its Finance Committee on 25 February 2026. According to TfL's licence fee notice, some assessment fees changed on 9 March 2026 and some licence fees on 1 June 2026. In the copy we read, the private hire table did not extract cleanly, so we are not quoting individual figures. Read the notice for the exact amounts that apply to your licence.

Licence fees are charged by a regulator under its licensing powers. Whether VAT is ever shown on them is a point to confirm on GOV.UK; we have not verified it, so do not claim VAT back on a fee unless your document clearly shows VAT.

Ultra Low Emission Zone (ULEZ) and vehicle costs

We could not verify current ULEZ charges or rules from TfL for this article, so we are not quoting them. Check the TfL website for the latest position. For tax purposes, penalty charges are generally not allowable business expenses, so keep your vehicle compliant rather than relying on a deduction.

For the wider expense picture, our guide to allowable expenses for Uber drivers shows what you can usually claim on your Self Assessment return.

How does VAT registration affect your Self Assessment and income tax?

Registering for VAT does not replace Self Assessment. You still report your self-employed profit to HMRC each year. If you are VAT-registered, your turnover figures for income tax need careful treatment, because VAT you owe to HMRC is not your income. Your bookkeeping must separate the two.

Many drivers confuse VAT-inclusive receipts with income. If you are registered and receive £3,600, only £3,000 is turnover for income tax under standard accounting, and the £600 is VAT collected. Under the Flat Rate Scheme the treatment of the difference between VAT collected and VAT paid has its own rules, so ask your accountant.

If you are in London and filing a first return, our Self Assessment checklist for London drivers covers the income tax side, and our guide on Self Assessment for London Uber drivers gives the wider context.

What are the common VAT mistakes London drivers should avoid?

The most common mistakes are registering without checking the numbers, charging VAT before you have a VAT number, mixing VAT into income, and missing return dates. Each can trigger a cost or a penalty. Below are the main ones and what they may trigger.

• Registering late once you pass £90,000: GOV.UK says you must pay VAT on sales since you should have registered and may face a late registration penalty.
• Not registering when your turnover is over the threshold because you assume the platform handles it: the legal responsibility sits with you as the business.
• Choosing the Flat Rate Scheme without checking the 16.5% limited cost rate: you could pay more than under standard accounting.
• Claiming VAT without a valid VAT invoice or receipt: HMRC can refuse the reclaim.
• Treating VAT collected as personal money: you owe it to HMRC and any shortfall must still be paid.
• Forgetting that Making Tax Digital rules apply to VAT-registered businesses: you must keep digital records and file through compatible software.

Late registration and VAT return penalties are set out on GOV.UK, and amounts depend on the facts. If HMRC raises a query or penalty, professional representation is recommended.

Key terms

• TOMS (Tour Operators' Margin Scheme): a VAT scheme that charges VAT on an operator's margin rather than the whole fare.
• PHV (private hire vehicle): a licensed minicab or ride-hailing vehicle booked in advance.
• Input VAT: VAT you pay on business purchases that you may be able to reclaim if registered.
• Output VAT: VAT you charge on your sales that you pay to HMRC.
• Flat Rate Scheme: a simplified scheme where you pay a fixed percentage of VAT-inclusive turnover.
• MTD (Making Tax Digital): HMRC's rules requiring digital records and software-based submissions.
• UTR (Unique Taxpayer Reference): your ten-digit tax reference.

How UK Driver Accountants helps

UK Driver Accountants is an accountancy firm for drivers only, with fixed fees from £20 a month, and we are independent of Uber, Bolt and every other platform. We can run your VAT numbers for both schemes, handle registration, set up MTD-compatible records and file your returns. See our VAT service for drivers and our fixed-fee pricing.

If you are based in the capital, our London drivers page explains how we work with local drivers.

Conclusion: decide on your own figures

The 2026 VAT change in London is a change for operators, but it has made registration a live question for drivers. The £90,000 threshold is unchanged, registration is online through GOV.UK and the right answer depends on your costs. Do the sums before you apply, then keep clean records either way.

If you want a second pair of eyes on the numbers, contact our team and we will go through your situation.

Last reviewed 9 October 2026 by the UK Driver Accountants tax team.

This article is general information and is not personal tax advice. Speak to a qualified accountant about your circumstances. If HMRC raises a dispute or penalty, professional representation is recommended.