Ride-sharing firm Bolt has criticised potential plans for a new “taxi tax” as “incredibly harmful” to the industry, as it trials a new feature letting drivers set prices and negotiate with passengers.

Bolt claims that tax changes would disproportionately affect shift-based workers and vulnerable people who rely on taxi services, says the Impartial Reporter.

The Chancellor is thought to be considering introducing a 20% VAT on all private hire fares to help raise funds in her autumn Budget, due to be delivered on Wednesday.

“We’re seeing very minimal price increases – we’re not seeing decreases,” said Kimberly Hurd, Bolt’s UK senior manager

Many cab drivers do not have to charge VAT on journeys because they are classed as self-employed and fall under the yearly earnings threshold.

“If the Government does decide to enable a 20% VAT on fares, it’d be incredibly harmful and destabilising to the industry,” she added. “That increase on fares directly increases the cost for passengers and hurts drivers’ livelihoods.”

The “punitive” tax would fall hardest on “passengers that rely on this essential service and drivers that rely on this as income”, she continued, insisting that the threat of the proposals was a major driver of its decision to launch its “Bolt Flex” service, which it says is the first of its kind in the industry.

The model lets drivers outside of London set their own trip prices and accept price offers from passengers, with a flat commission for each trip. Bolt said it meets demands from its drivers for more control over pricing, particularly for longer or more difficult trips.

It also means passengers who are willing to pay more for a journey can bid a higher price and their trip is more likely to be accepted.

Ms Hurd said the market “self-regulates” to avoid prices being set too high, but that testing of the model shows that its drivers are earning more from prices being set higher.

(Picture: Bolt)