How to Start a Taxi Business in the UK

The UK's taxi drivers provide an invaluable service, navigating the hustle and bustle of a major city, getting you to the airport on time, and offering a lifeline to those who live in the most rural corners of our country. If you love driving and enjoy meeting new people, starting a taxi business could be your fastest route to a fulfilling and profitable new career.

 

What are the benefits of starting a taxi company?

Starting a taxi company rather than working as an employed driver gives you more work flexibility and the opportunity for a higher income. You can put in the hours when you like, and as long as you abide by local regulations, where you like.

There are also opportunities to grow your taxi business if you can’t keep up with demand. This is becoming especially common in urban areas with low emission zones and heavy traffic, where more and more people are regularly using taxis and private hire vehicles (PHVs) rather than their own vehicles to commute or shop.

By 2023, the number of licensed taxis and PHVs in England rose to nearly 300,000 - an increase of 11% from 2022. These numbers continue to rise, especially in the private hire sector, thanks to the popularity of companies like Lyft and Uber. This shows that there is space for entrepreneurs looking to carve out a niche in the market, so let's take a closer look at how to start a taxi business.

Choosing the right type of taxi business

There are options when it comes to earning a living as a taxi driver. You may prefer to go solo and want to know how to start a taxi business with one car. Or maybe you love the idea of owning a fleet and seeing them cruise off to all corners of the city each day.

There’s also the choice of running a taxi (also known as a public hire vehicle) or driving a private hire vehicle. The main difference between the two is that a taxi can be hailed on the street (though they may also take bookings), while a PHV must always be pre-booked. Working as a self-employed PHV driver has been made much easier thanks to the rise of Uber-style services, and you might prefer to work with one of these brands to access their customer base and technology.

So, what's right for you? Many people prefer to start with one vehicle—often one they already own. This cuts down on start-up costs and leaves you less financially vulnerable than those starting out with a fleet. Starting solo lets you build up a client base and reputation organically and all under your management, and then you have the option to expand later.

If you have money to invest and want to start from day one with a fleet of taxis, you’ll need to balance the risk of not yet having built a good reputation with the earning potential of a higher number of vehicles. Take a close look at our marketing advice to see how to give your business the best start.

What are the costs involved?

The first piece of advice in any article on how to start a taxi service is to invest in a reliable vehicle. You may already own a nice, well-maintained car, but is suitable for the type of taxi service you want to run? If you need to buy a new vehicle, personal funds, leasing, and loans are all options, and don't forget to explore the second-hand market, which can be especially useful if you're a Londoner looking to start out in a black cab.

In addition to vehicle costs, you'll need to factor in insurance for both the vehicle and your business operations, the cost of licenses and advertising, a card reader for cashless payments, a taximeter, GPS, dispatch software for fleets, and then the costs associated with vehicle maintenance and fuel.

Taxi business checklist

When starting a taxi company, there are steps you are legally obliged to take, such as insurance and licensing, and steps that are advisable to give your business the best chance of succeeding, such as market research and advertising.

1. Write a business plan

Writing a comprehensive business plan will help you strategise like a successful entrepreneur. It will detail:

• he type of taxi business you’ll run and the services you’ll offer, such as city cab fare, airport runs, minibus services, or executive chauffeuring
• Your local taxi services market research
• Your SWOT (strength, weakness, opportunities, threats) analysis
• Your unique selling point (USP)
• Your budget for launching and running the business during its first year
• Your marketing and advertising plan
• Predicted earnings

2. Meet all legal and regulatory requirements

When you want to know how to start a cab company, licenses and all the other business legalities must be a top priority. If you're going to be driving, you must hold a valid driving license and have had this for at least 12 months. Ask the local council if you need a business license and check for other operational and licensing requirements they have.

To get a taxi driver's license in London, you must obtain a Transport for London driver’s license, choosing either the small or standard operator’s license. You must be over 21 to do so and will need to obtain a new one every five years. If you plan to work outside London, you will need to get a PHV Operator License from your local council. In both cases, medical and DBS checks are statutory.

3. Obtain insurance

When you’re starting a taxi business, it’s important to protect all your risks. When you start using a vehicle as a taxi or PHV, you need to insure it as such, to reflect the higher level of risk. You’ll need public hire insurance for taxis you can hail and private hire insurance for PHVs. The cost of these varies depending upon the make, model, and age of your vehicle, the area you intend to operate in, where you park overnight, and your age and claims history.

You'll need to take out public liability cover to protect yourself against claims for injury and property damage by customers and members of the public.

Many taxi owners like to include breakdown cover to ensure they can get back on the road and earn as quickly as possible. If you employ any staff members, even on a part-time basis, by law, you must hold at least £5 million of employer's liability cover.

There are other areas of your business you can protect, such as personal accident cover in case an illness or injury leaves you unable to work for a prolonged period and business interruption cover should unforeseen circumstances halt your business operations.

4. Marketing and promotion

One of the biggest benefits of working for companies like Lyft and Uber is that you don't need to consider advertising your services. When starting a taxi business from scratch, you need to ensure customers can "find" you. Create a website, and even if it's very basic, make sure it is SEO-friendly to help you rank high on local searches.

Set up social media accounts for your business, as this will allow individuals and other businesses to tag you in posts. Clearly state the area your service covers on each of these, the types of services you provide, your hours, and your USP.

Although your digital presence is key, taxi companies can also go "old school" and hand out business cards at pubs, clubs, restaurants, universities, colleges, and gyms and attach business cards or fliers to community boards.

Top tips for starting a taxi company

Avoid the potholes and make sure you don't stall when you first start with our handy top tips for new taxi businesses:

• Don't skimp on the market research. There are many other taxi firms out there, so how can you stand out? What niche isn't being covered in your area? Think green services using an electric or hybrid vehicle, women-only services, rural routes, and late-night hours.
• Talk, talk, talk. Cabbies are known for their banter and when you're in the early stages of your business, talk to as many people as you can. Let family and friends know about your new venture, tell your customers about yourself to build rapport and trust, chat with local businesses, and make friends with other taxi drivers to avoid stepping on toes and build up a good working relationship for fare referrals.
• Look into leasing. It may offer the most financially viable and safe route to obtaining a vehicle that customers will want to ride in, and that provides the reliability you need.
• Paying annually, choosing a higher excess, and combining all aspects of your taxi business coverage under one umbrella policy will get you the most competitive price on your insurance premium.

Contact Park Insurance to find out how we can support your new taxi company with competitively priced coverage that protects all aspects of your business operations.