VEEZU: VAT TREATMENT OF PHVs


treatment of


VAT PHVs


The 20% VAT threat


A blanket VAT rate of at least 20% on all PHV fares would be just as problematic. Treasury estimates have suggested such a measure could raise approximately £750 million annually; however, the accuracy of that figure is highly questionable. Additionally the revenue would come straight from passengers’ pockets, as well as jeopardise the earnings of thousands of licensed drivers and their families.


The impact would be felt most acutely in places where PHVs are a necessity, not a luxury. The government’s new Transport Connectivity Metric - developed by the Department for Transport (DfT) - measures how easily people can reach essential destinations such as jobs, schools, hospitals and shops within an hour. It provides a national picture of access to essential services, assigning each area a connectivity score from 0 to 100. The data reveals stark regional inequalities. London scores 84 out of 100, while Wales scores just 53, meaning the capital is almost 60% better connected. The South West (56), East of England (58), and West Midlands (64) perform only marginally better, leaving London approximately 40% more connected than the rest of the country.


The DfT’s analysis also notes that driving is the “great equaliser”, since it is the only mode that offers comparable access in rural areas. Yet for many households, access to a car is limited. In places where a single vehicle must cover the needs of an entire family, or where no car is available at all, PHVs often provide the only practical way to get to


PHTM NOVEMBER 2025


work, school, hospital appointments, or home safely when public transport has stopped for the night.


Within Veezu, our data shows that more than 50% of rides support essential journeys


such as


healthcare, transport, and educational needs, while only 12% are for leisure. Should the government impose 20% VAT on PHV fares, then passengers who depend on regular and frequent PHV services, due to little or no public transport provision, will be subject to a huge jump in fares. For those on tight budgets, particularly individuals who rely on PHVs for basic mobility, even this increase can be the difference


between staying connected and becoming effectively stranded.


Higher costs would not only affect passengers; tens of thousands of licensed drivers could also be forced out of the industry as demand for services declines. For operators of all sizes – from family-run firms to large national players – it would likely mean curtailed investments in cleaner, more efficient vehicles, stifling technological innovation, and ultimately dampening consumer confidence until the legal and taxation landscape becomes clearer. Taken together, these pressures risk eroding the key role that PHVs play in delivering affordable, round-the-clock transport to communities across the UK, leaving passengers to pay the price - both literally and figuratively.


The continued search for stability, simplicity and certainty


Whether the Budget brings clarity or prolonged uncertainty, we cannot afford to overlook the social and economic importance of PHVs. Any VAT reform that ignores that reality risks pricing out the very communities that depend on them most, while also stifling the industry’s ability to innovate and grow.


Any reform must work equitably for rural communities, towns and cities alike, for homegrown businesses and big tech platforms, ensuring fair competition whilst keeping fares affordable for passengers who depend on these services every day.


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