Uber will raise its prices by up to a fifth on Tuesday in a fresh blow to commuters already facing higher fares for public transport.
The company is increasing charges after a High Court ruling which has forced it to start applying VAT.
The move will add further pressure to household budgets in the midst of a cost-of-living crisis and is likely to erode its position as a more affordable option than black cabs.
Uber has not yet confirmed its new pricing structure, but the increase could be as high as 20pc if it tries to recoup the total VAT bill. It has said the details are commercially sensitive and that price rises will vary between cities.
The increases come after a 3.8pc rise in rail fares earlier this month, adding more than £200 to the cost of some annual season tickets.
In London, the mayor Sadiq Khan has hit commuters with an inflation-busting increase in Tube fares of an average of 4.8pc, while some bus fares will jump by 6.5pc.
Uber has been forced to increase prices following the landmark legal ruling in December. The court said private hire operators in London should contract directly with passengers, rather than the current legal setup in which passengers and drivers enter into a relationship.
Uber previously took a cut of 25pc with passengers contracting from drivers. Now it will collect the ride fares itself and pay the driver directly.
A spokesman for Uber said: “We have completed the changes to our business model as required by law. Other operators in London are also required to make changes to their models to comply with the relevant law.
“Uber operates in an intensely competitive market and we are committed to always offering consumers affordable prices. As always, riders will get a trip price before booking their journey.”
The business’s gross bookings in the UK in the first nine months of 2021 were $1.7bn (£1.3bn), which would mean an annual VAT bill of hundreds of millions of pounds if applied nationally. London is by far the company’s biggest market in the UK, and one of its top five globally.
Uber gained a foothold in the capital by offering cheaper rides than competitors, but some users have complained they are now paying more than for a black cab.
Uber was already increasing prices last year because of a shortfall in drivers after the Covid pandemic hit. The company raised prices by 10pc in London in November 2021 as it struggled with recruitment. It was the first price rise in 2017.
