The THREE financial support recommendations put forward to help save the London taxi from disaster
Despite growing challenges, a new report by Centre for London, backed by FREENOW, lays out a strong financial plan that, if adopted, could not only stabilise the trade but also position it for long-term growth.
In this article we zone in on three recommendations that focus on reducing costs for drivers, supporting the transition to zero-emission capable (ZEC) vehicles, and ensuring the trade remains accessible and competitive.
Commissioned to inform Transport for London’s (TfL) 2025 Taxi & Private Hire Action Plan, the report examines the financial pressures facing the black cab trade. Rising vehicle costs, the phasing out of grants, and a decline in new driver recruitment have all contributed to a shrinking industry.
1. Interest-Free Loans to Support New Vehicle Purchases
One of the biggest financial hurdles for taxi drivers is the cost of purchasing a new vehicle. The LEVC TXE, the only current model approved for new licences in London, costs over £74,000. While previous schemes such as TfL’s Delicensing Scheme helped offset some of these costs, these financial incentives have largely been phased out, leaving drivers to bear the full financial burden.
To ease this transition, the report calls for the introduction of a government-backed interest-free loan scheme, similar to the successful Switched On Taxi Loan in Scotland. This scheme allowed drivers to take out loans of up to £75,000 to cover the cost of switching from diesel to electric taxis. Crucially, the loans were repaid over a manageable six-year period, reducing the financial strain on drivers.
If applied in London, this model would ensure that more taxi drivers could afford the switch to ZEC vehicles without needing substantial upfront capital. The scheme would also likely make the trade more attractive to new drivers.
2. Extending and Enhancing the Plug-In Taxi Grant
Since its launch in 2017, the Plug-In Taxi Grant (PiTG) has been a key driver in helping taxi drivers transition to electric vehicles. Initially offering £7,500 per vehicle, the grant has since been reduced to £6,000 in 2024 and is set to drop further to £4,000 from April 2025.
The report argues that to maintain momentum in the transition to an electric taxi fleet, the government should extend the grant until at least March 2027 and, if financially viable, restore it to £7,500.
This funding has been a key driver in accelerating the adoption of ZEC taxis, with over 60% of London’s black cab fleet now electric. Keeping this support in place will ensure drivers are not forced to absorb higher costs at a time when operating expenses, including insurance and energy prices, are rising.
3. VAT Exemption for Black Cabs to Reduce Upfront Costs
London’s black cabs are the only fully wheelchair-accessible vehicles on the road that do not qualify for VAT exemption. While adapted vehicles for people with disabilities currently benefit from this tax break, black cabs—despite their mandatory accessibility features—do not.
The report calls for the government to extend this 20% VAT exemption to black cabs. Doing so would immediately reduce the purchase price of a new LEVC TXE by around £12,000, significantly lowering the financial burden on drivers.
Beyond the cost-saving benefits, the exemption would also encourage further investment in accessible vehicle design. With the entire black cab fleet required to be wheelchair-accessible, this policy would ensure that London continues to offer high-quality, inclusive transport for all passengers.
These three financial measures—interest-free loans, an extended Plug-In Taxi Grant, and a VAT exemption—form a practical roadmap for securing the future of London’s black cabs. Implementing these policies would provide immediate relief to existing drivers, reduce the financial barriers for new entrants, and ensure the trade continues to play a key role in London’s transport system.
The report makes a strong case that London’s black cabs are not in inevitable decline—far from it. With targeted financial support, the industry can modernise, grow, and continue to provide an essential, sustainable, and accessible service for the capital.
