How to start a private hire taxi business in the UK
To start a UK taxi business, you need start-up capital, a business plan, a taxi driver’s licence and appropriate insurance cover. Missing any of these steps can cause severe delays in getting your private hire service off the ground, leading to potential legal disputes and costly surprises further down the road.
Luckily, this article is your go-to guide. We’ll cover everything you need to know, from financing, legal requirements and the equipment you’ll need to running costs and how to calculate taxi fares – and more.
Step #1: Financing
Start-up capital is crucial to the success of your taxi business. Whether you have personal savings or need to apply for a loan, having enough money is a must. Without proper budgeting and forecasting, you risk running your business at a loss.
Consider if you want to buy or lease a private hire vehicle – this is the most important part of any taxi service. Buying a private hire vehicle is more expensive than renting one in terms of monthly instalments.
Additionally, ensure you have enough cash to cover running costs and other business expenses until you start accepting payments. These include:
- Fuel costs
- Taxi insurance payments
- Vehicle maintenance costs
- Licencing and registration fees
You must include your financial projections within your business plan, especially when applying for a loan – more on this shortly.
Looking for cheap taxi insurance? Get your quote today!
Get QuotesStep #2: Create a business plan
A business plan is a roadmap to your taxi business’s success. It’s a crucial and comprehensive document loaners will require if applying for funding. It also helps you plan short and long-term goals and manage day-to-day business operations.
Business plans must include various operational aspects, like market research and working hours. Here’s our advice:
Business details
- Employees – will you operate alone or will you hire a taxi driver/s?
- Company name – decide on a name for your taxi business.
- Branding – develop a strong brand identity with logos and catchy slogans.
- Marketing strategies – how will you attract customers and build brand awareness?
- Business registration – register your company with the relevant authorities.
- Contact details – how will customers contact you/book your taxi service?
- Payments – how will you accept payments?
Market research
- Identify your target market – business travellers, students, families, etc.
- Analyse your competitors and their offerings – what do they charge per mile?
- Assess supply and demand – there might be an abundance of 9 to 5 airport taxi operators but very few after midnight.
Operational planning
- Working hours – determine your operating hours based on supply and demand.
- Location – consider factors like accessibility, customer density and costs.
- Storage – where will the vehicle/s be kept when not in use?
- Niche markets – identify potential [niche markets] like woman-only drivers, kid-friendly services or corporate accounts.
- Customer service – outline your company values, procedures and standards.
- Booking systems – choose a booking system/taxi driver app that suits your business needs, considering cost, features and support.
Finances
- Forecasting – include revenue projections, operating costs and profit margins.
- Pricing strategy – develop pricing structures that cover expenses and generate profits, considering fuel costs, travel distances, time and traffic.
- Vehicle costs – decide if you will buy or lease a private hire vehicle (PHV), consider maintenance costs, MOT and taxi driving licence renewals and insurance fees.
- Contingency fund – set aside (or work towards) a buffer account for unforeseen expenses. How would you cover costs if you’re ill or in an accident?
Step #3: Understand start-up legalities
Here are a few start-up legalities you need to consider:
Private hire driver requirements
In addition to the above, private hire operators – private taxis/shuttles, chauffeurs, minicabs, limousines and tour guides – must meet the following requirements:
- Legally permitted to live and work in the UK
- Between 18 and 75 years old – 21 might be the legal age in certain regions
- Pass criminal record checks – Disclosure and Barring Service (DBS) in England and Wales; Protecting Vulnerable Groups (PVG) Scheme (Scotland); AccessNI (Northern Ireland)
- Pass the Knowledge Test – applicable to London taxi drivers
- Deemed medically fit by a doctor
- Can communicate in English – at a basic level at least
- Private hire vehicles must meet the Euros 6 standard
Bonus read: Find out how to become an Uber driver.
Licensing requirements
PHV operators need:
- Valid EU/UK driving licence
- Private hire taxi operator licence
You can apply for these via:
- The local council – if operating outside of London
- Transport for London (TfL) – if operating in the Greater London area
- Via the Driver and Vehicle Agency (DVA) NI – in Northern Ireland
PHV operator licences are valid for five years. You could face jail time for accepting payments for hire and reward services without a valid private hire licence.
Bonus read: How to renew an expired driving licence in the UK.
Business registration
- A self-employed taxi driver (with no employees) will generally register as a sole trader.
- Partnerships are ideal for multiple business owners.
- Limited companies are available for bigger business ventures such as taxi fleet companies.
Note: Tax obligations differ between different types of taxi businesses.
Tax obligations
Understand HMRC tax laws for various taxi companies, including:
- VAT
- Income tax
- National Insurance contributions
- Tax checks – England and Wales
- Self-Assessment Tax Forms – for self-employed taxi drivers
- Corporation Tax – for large-scale taxi companies
Employment laws
Familiarise yourself with UK employment laws and ensure you have employer’s liability insurance if you employ drivers for your private hire vehicles.
Insurance
All UK motorists need appropriate car insurance to drive on the road. Minicab drivers must have at least third-party-only (TPO) car insurance to be legally compliant.
Variations of taxi insurance offered by insurers include:
Other considerations
Private drivers must understand various compliance procedures and road rules. A few examples include the Data Protection Act (as you’ll collect personal information from your passengers) and whether or not private hire drivers can access bus lanes.
Knowing these details will ensure the success of your taxi company and prevent any infringements.
Step #4: Get taxi insurance
Anyone carrying passengers for hire and reward purposes needs taxi/minicab insurance in the UK. It is a legal requirement.
Taxi insurance is a type of business policy that protects taxi drivers, their vehicles and third-party persons in the event of an accident.
It covers a wide range of road-related mishaps from vehicle repairs and public liability insurance to loss of income and legal expenses.
Insurance premiums are influenced by the driver’s age and the vehicle they drive – ranging from around £1,600 to £1,800 per year.
Compare taxi insurance quotes from multiple providers to find the best deal for your private hire business.
Step #5: Attract customers
Customers are the lifeline of your business. Without them, you won’t generate enough income to cover operating costs and turn a profit. This makes attracting customers an essential part of your business model and lays the foundation of your marketing strategies.
Here are a few ideas:
- Build a brand: Create a memorable name, logo and slogan that reflect your business’s personality and values. Ensure your brand identity is consistently applied across marketing materials, from vehicle signage and websites to social media accounts.
- Target your niche market: Tailor your services to the specific needs of your target market. For instance, consider child car seats for added protection and peace of mind if families are your go-to clientele.
- Be unique: Think of creative ways to elevate your taxi service to achieve the utmost customer satisfaction. Have disposable refreshment towels ready when collecting passengers from the airport, or offer a quick shoe-shine service for business executives. Attention to detail will set you apart from other private drivers.
- Create awareness: Use social media platforms, email marketing and websites to reach potential customers. Don’t underestimate the power of traditional marketing – business cards, poster advertisements and flyer drops work too.
- Network: Build relationships with local businesses and organisations to generate referrals. Encourage satisfied customers to recommend your services or partner and donate to local charities.
- Offer discounts: Research local taxi fares and offer competitive pricing. Attract new customers with special offers, like a discount to ‘get £5 off your first trip’. Reward repeat customers with loyalty programmes or offer lower rates during off-peak times.
What equipment do private hire drivers need to start a taxi business?
Here’s a list of recommended equipment private hire drivers need:
Private hire vehicle
A reliable car is the cornerstone and bloodline of your business. Ensure it meets the licensing requirements, is comfortable and is suitable for transporting passengers.
Bonus read: Best Cars For Private Hire Taxis.
Card machine
You should consider a card machine if customers don’t pay directly through an app.
Mobile phone
Your taxi business is all about communication. Mobile devices (with ample data and minutes) ensure you never miss customer requests.
Satellite navigation
Sat-navs help drivers navigate efficiently, saving time and fuel in the long run.
Taxi meter
Taxi meters are highly recommended if you don’t provide fixed rates for passenger journeys via a booking system or app. They accurately calculate taxi fares based on distance or time.
Bluetooth headset
Wireless headsets and mounted mobile device holders ensure responsible driving at all times.
Booking system
An efficient system streamlines bookings, captures passenger details, manages schedules and allows customers to rate your service. You could also integrate this with cloud-based accounting software to track income and expenses!
Bonus read: Best apps for taxi drivers
Dashcam
Dashcams are invaluable as they provide evidence in the event of accidents, protect you against false claims and improve driver behaviour. Some insurance providers may group this with a telematic insurance policy, where black box devices monitor how and where you drive.
Bonus read: Why private hire drivers need a dash cam.
What are the typical costs of starting a taxi business?
Costs for starting your own taxi service in the UK can vary greatly, depending on:
- The vehicles you drive – £10,000 – £60,000 when buying new
- Fuel costs – £70 (petrol) – £82 (diesel) per tank
- Insurance premiums – £1,600 – £1,800 annually
- Staff costs – entry-level driver wages start from £16 per hour
- Licensing – £100 – £500
- Tax obligations – based on your earnings
- Branding/advertising
- Running costs – business premise rent, accounting software, booking systems, phone lines, utility costs, etc.
Bonus reads:
How to calculate taxi fares?
Here are the most common ways to determine your pricing strategy:
- Apply a set price for the journey – pre-agreed with the passenger
- Apply an initial charge (e.g. £5) then charge for every subsequent mile (e.g. £2.50)
- Apply an initial charge (e.g. £5) followed by taximeter readings
- Location: Bigger cities typically charge higher rates than rural areas.
- Time of day: Peak-hour driving is generally more expensive than off-peak times.
- Time of year: Bank holidays or festive periods generally have higher charges.
- Distance: Longer distances = higher fares.
- Demand: More taxi operators in a specific area can lower fares, while fewer taxis can charge more.
Calculating taxi fares depends on several factors, such as:
Typical pricing strategies
Taxi fare rates for licensed taxi drivers, such as black cabs, are monitored and regulated by Transport for London guidelines. Private hire operators, on the other hand, can set their own rates but generally follow a pricing structure similar to that of black cabs.
Note: Standard Uber pricing based on a journey from Hammersmith to Kings Cross (excl. surge fees). This 10-mile journey typically takes an hour.
| Distance or Route | Approx. Journey Time | Time Period | Price Range |
|---|---|---|---|
| 1 Mile | 6 – 13 minutes | ||
| Mon – Fri (05:00 – 20:00) | £7.60 – £11.80 | ||
| Mon – Fri (20:00 – 22:00) | £7.60 – £12.00 | ||
| Sat-Sun (05:00 – 22:00) | £7.60 – £12.00 | ||
| Every night (22:00 – 05:00) | £9.00 – £13.00 | ||
| Public holidays | £9.00 – £13.00 | ||
| 2 Mile | 10 – 20 minutes | ||
| Mon – Fri (05:00 – 20:00) | £11.60 – £18.40 | ||
| Mon – Fri (20:00 – 22:00) | £12.20 – £18.60 | ||
| Sat-Sun (05:00 – 22:00) | £12.20 – £18.60 | ||
| Every night (22:00 – 05:00) | £13.40 – £19.60 | ||
| Public holidays | £13.40 – £19.60 | ||
| 4 Mile | 16 – 30 minutes | ||
| Mon – Fri (05:00 – 20:00) | £20.00 – £29.00 | ||
| Mon – Fri (20:00 – 22:00) | £22.00 – £30.00 | ||
| Sat-Sun (05:00 – 22:00) | £22.00 – £30.00 | ||
| Every night (22:00 – 05:00) | £23.00 – £34.00 | ||
| Public holidays | £23.00 – £34.00 | ||
| Heathrow to Central London | 30 – 60 minutes | General charge | £61.00 – £114.00 |
| Uber Pricing (10-mile London journey) | Approx. 1 hour | ||
| UberX | £22.14 | ||
| UberXL | £33.52 | ||
| Uber Green | £21.89 | ||
| Uber Pet | £26.94 | ||
| Uber Comfort | £27.05 | ||
| Uber Exec | £39.93 | ||
| Uber Lux | £60.81 | ||
| Uber Access | £22.14 |
Final thoughts
As you can see, there are many things to consider when setting up a private taxi business in the UK. Things like starting capital, business registration, market research, licencing, background checks and insurance are all needed before you can hit the road as a private hire driver.
A reliable car and the necessary equipment will ensure your taxi service goes from strength to strength. Use SimplyQuote’s 100% free, online comparison tool to find the best insurance deals today.
Happy driving and good luck!
Frequently Asked Questions
Running your own taxi business can be profitable, earning you between £20,000 and £30,000 per year.
Read: [How to increase profit in taxi businesses] next.
Private hire taxis collect passengers who have booked taxi services via a booking platform, like Uber. Public hire taxis pick up hailed passengers on the side of the road or from taxi ranks, like black cabs.
The amount of tax private hire taxi drivers pay depends on their annual earnings:
- Personal allowance (up to £12,570) = 0%
- Basic rate (£12,571 – £50,270) = 20%
- Higher rate (£50,271 – £125,140) = 40%
- Additional rate (over £125,140) = 45%
PCO licences take around 12 to 16 weeks in the UK.