If you are thinking of starting a taxi business, the most important initial steps are to research the UK taxi industry, decide what type of service you want to offer, choose a name, and make sure you have the right vehicle, insurance, and licences.
The industry has changed considerably over the past decade, not least because of the growth of private hire apps such as Uber. However, there is still plenty of demand for taxis and private hire vehicles across the UK.
You can start out as a self-employed driver, or set up a larger business with several vehicles and drivers.
Before you do either, you need to understand the difference between a taxi and a private hire vehicle, as the rules are not the same.
A licensed taxi can usually pick up passengers from a taxi rank or be hailed in the street. A private hire vehicle (PHV), sometimes called a minicab, must be booked in advance through a licensed operator.
The licensing rules also vary by location, with Transport for London (TfL) responsible for taxi and private hire licensing in London and local councils handling licensing elsewhere.
What are you going to offer?
When setting up a business, you must consider what kind of taxi service you will offer. Finding a niche can help you stand out in an overcrowded and competitive industry.
You may want a taxi company which operates in a city centre. The location offers a diverse range of potential customers and an interesting driving environment.
Alternatively, you might decide it’s best to be known as a local taxi company, concentrating on customers within a particular town or area.
Your taxi company could specialise in school transport or airport transfers. Executive and corporate travel is another option, as is providing accessible transport for passengers who need it.
The type of work you want to do will also affect the vehicle you choose and the hours you work.
Naming and branding your taxi company
If you choose to be a self-employed taxi driver, you may not have too much interest in the name or establishing a brand, particularly if you get your work through an existing operator or app.
However, as a company with multiple vehicles and drivers, you will undoubtedly see the benefits of building a strong brand.
If you are going to operate in a small area, your name could simply be inspired by the location. This will also help it to become visible in online searches and recognisable to locals.
However, keeping a local name might make it harder to branch out. A name such as Edgware Cabs, for example, may not attract much interest outside the area if you later decide to expand.
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Taxi and private hire regulations
The licences you need depend on whether you are operating a taxi or private hire vehicle and where you are based.
Outside London, taxi and private hire licensing is generally handled by your local council. In London, it is handled by Transport for London.
If you’re going to drive yourself, you will need the appropriate taxi or private hire driver licence. The vehicle itself will also need to be licensed.
There is an additional requirement if you want to run a private hire business and take bookings yourself. Private hire bookings must go through a licensed operator, so you’ll need a private hire operator licence if your business is going to accept those bookings.
If you simply drive for an existing private hire operator, you don’t need your own operator licence.
The application process varies depending on the licensing authority. It can include a DBS check, medical checks and assessments covering driving ability or local licensing rules.
You can check the general requirements on the government’s taxi driver licensing page, but you should also check the rules with the council where you intend to work.
What if you want to operate in London?
London has its own taxi and private hire licensing system.
TfL licenses taxi and private hire drivers, vehicles and private hire operators in the capital. There are different requirements depending on whether you want to drive a London taxi or work as a private hire driver.
There are also rules covering which vehicles can be licensed, including their age and emissions.
For that reason, check the current requirements before buying a vehicle. You can find them on the TfL taxi and private hire licensing pages.
The cars you choose
The cars you decide to operate will have a dramatic impact on your clientele, the rates you charge and the costs you incur.
For most taxi and private hire drivers, reliability and running costs will be particularly important. If you expect to cover a high mileage each year, relatively small differences in fuel or charging costs can soon add up.
By comparison, if you want to specialise in executive or corporate work, a more expensive vehicle may help you attract higher-spending customers.
Electric and hybrid cars are now widely used for taxi and private hire work, particularly in larger cities. Whether an electric car makes financial sense will depend on the mileage you cover, where you can charge it and the type of journeys you expect to make.
Before buying or leasing anything, make sure the vehicle meets the licensing requirements in your area. Councils can have their own rules on matters such as vehicle age and emissions.
You also need to look beyond the purchase price. Fuel or electricity, insurance, servicing, tyres and repairs are all significant costs when a car is being driven for a living.
Taxi and private hire insurance
Do not forget that you will need sufficient insurance to operate your business.
Normal car insurance isn’t enough if you’re carrying passengers for payment. You’ll need a policy which covers the vehicle for taxi or private hire work.
If you have employees, you will normally also need employers’ liability insurance. You may also want public liability insurance to cover other risks involving customers and members of the public.
If you operate multiple vehicles, it is worth speaking to fleet insurers to see whether covering the vehicles together works out cheaper than arranging individual policies.
Get some insurance quotes before you buy your first vehicle. The cost can make a significant difference to whether the business is viable.
Finding customers
The way taxi and private hire drivers find customers has changed enormously.
You can work through an established private hire operator or app, find your own customers, or use a mixture of the two.
Apps can provide a ready source of work, which is useful when you are starting out, although you need to take their fees into account when working out what you actually earn from each journey.
If you’re building your own local business, a website and Google Business Profile can help customers find you. Local hotels, pubs and businesses can also provide regular work.
Airport transfers are particularly well suited to advance bookings, while contracts with businesses, schools and other organisations can provide a more predictable source of income.
Word of mouth still matters too. If you’re reliable and customers know they can get hold of you when they need a car, they are more likely to use you again.
Working for yourself
If you’re starting out on your own, becoming a sole trader is usually the simplest way to work for yourself.
You don’t need to form a limited company simply because you’re running a taxi business. You can always reconsider the structure later if the business grows and you start operating several vehicles or employing other drivers.
Our guide to sole trader or limited company explains the main differences.
You’ll also need to register with HMRC when required and keep records of your business income and expenses. If this is your first time working for yourself, our 15 steps to becoming self-employed covers the main things you need to sort out.
Taxi and private hire licensing also has a direct link with your tax affairs. When renewing certain driver and operator licences, you may need to complete an HMRC tax check and give the resulting code to the licensing authority.
Keep track of your costs
Vehicle costs will take a large chunk out of the money you receive from fares, so keep proper records from the beginning.
In addition to the cost of buying or financing the car, you could be paying for fuel or electricity, insurance, servicing, repairs, tyres, cleaning, licence fees, and app or operator charges.
Keep receipts and records for your business expenses as you go. Our guide to self-employed accounts covers the basic records you need to keep.
Knowing these costs is also important when deciding what you need to earn each week. A busy taxi can bring in a lot of fare revenue without necessarily generating the same amount in profit.
Draw up a business plan
You should aim to create a really simple business plan that outlines your budget and goals. Before you start, it is best to know whether starting the business is a viable and profitable option for you.
Your business plan should detail the market you are entering, your expected start-up and ongoing costs, and your projected earnings.
If you’re starting out as a single driver, it doesn’t need to be complicated. Work out what the vehicle and other costs will be each month, what you expect to earn and how much work you’ll need to do to make the numbers add up.
