How To Start A Taxi Business

Why start a taxi business?

The first taxi rank opened in London (home to the world’s oldest regulated taxi service) in 1634 and was served by a handful of horse-drawn carriages. Today, there are nearly 290,000 licensed taxis and private hire vehicles (PHVs) in operation in England alone.

Here are just a few reasons to start your own taxi business and join this centuries-old sector, which, other than the introduction of engines, has hardly changed:

It’s accessible: As long as you have a car, a driving licence, and a taxi or private hire licence, you can set yourself up as a taxi driver.
Be your own boss: You can choose when you work and which jobs you accept, and you’re accountable to no one but your passengers. A whopping 84% of all taxi drivers are self-employed.
Meet lots of people: If you’re a people person, what better profession than one that allows you to meet multiple passengers, from all walks of life, every hour. Just remember that not everyone wants to chat.
A stable and growing market: Demand for taxis has grown consistently year after year since 2019 (17.38 million users) to today (18.29 million), and is predicted to reach 18.81 million by 2028.

Start a taxi business in 5 steps

1. Research and choose your market

Thorough research will allow you to identify where you could most profitably position your taxi business in the market.

The proof of demand is in the figures outlined above. The market has seen steady growth over the past five years and is set to continue growing over the next five.

Here are several niches that your taxi business may be able to take advantage of:

Taxi: A taxi, or hackney carriage (as it’s known regardless of where it’s based) must be hired at a rank or hailed on the street.
PHV: PHVs must be booked in advance. They are not allowed to use taxi ranks or pick up customers from the street.
Dual licences: Dual licence vehicles are permitted to act as taxis and PHVs
Wheelchair accessible: These taxis or PHVs are equipped to allow wheelchair passengers to enter, ride and exit the vehicle. In England, 55% of taxis are wheelchair accessible and 2% of PHVs are.
‘Green’ taxis: The first electric taxi was introduced in 1897, but after the heavy and expensive vehicles were involved in several accidents, they were abandoned by 1900, not to be seen in the capital again until the 21st century. Now, however, they’re on the rise, with the number of hybrid taxis doubling between 2020 and 2023 (10% to 22%) and the number of electric taxis increasing from 0.2% to 0.8% over the same period. As of 2016, all taxis in London must be zero-emissions capable.
Taxis driven by women: More than 90% of taxi drivers are men. To counter this, and to prioritise the safety of women and children, several PHV companies in the UK specialise in women-only drivers.

2. Create a budget for your taxi business

Aside from the cost of acquiring your vehicle, starting your own taxi business can be a relatively affordable and accessible business opportunity.

However, as with any business venture, you should write a business plan and create a budget before you start. For a more detailed guide, you can read our article on how to write a business plan.

In terms of making sure you can cover the cost of starting your own taxi business, here are a few expenses to consider when you write your taxi business budget:

A vehicle: A TX taxi from London Electric Vehicle Company, the most common model in London, costs over £67,000. However, until April 2025, you can get a £6,000 Plug-in Taxi Grant from the government. You could also buy a used model from around £40,000. For PHV drivers, hybrid engine cars are now very common because they allow you to avoid clean air and ultra-low emissions zone charges. Popular PHV models cost in the region of £20,000-£30,000.
Card machine: In London and some other UK cities, taxi drivers must accept card and contactless payments using an approved device. Card machines costs start from around £19 plus fees.
Taxi meter: You can get a taxi meter for your cab from around £100 per year.
Maintenance: Your vehicle will see a lot of use, so it’s important to budget for regular maintenance.
Fuel: Whether it’s diesel, petrol or electricity, topping up the fuel or power of your taxi is a regular expense. Prices fluctuate, but recently, drivers with electric vehicles have spent a lot less than their fuel-based peers.
Insurance: You must have public taxi hire insurance if you drive a hackney carriage and offer ride-hailing services. Meanwhile, you’ll need private hire and reward insurance if you plan to become a PHV driver.
Taxes: If your taxi or PHV is not electric, you will have to pay vehicle excise duty. Zero-emissions vehicles are exempt but hybrids are not. Vehicles driven by, or for disabled passengers, are also exempt.

For more information about budgeting for your taxi business, and for pointers to help you write a formal budget, check out our five-step guide to creating a small business budget.

3. Register your taxi business

With your market research complete and the ink drying on your budget, you may be raring to start trading. But before you can pick up your first passenger, you’ll need to decide on a business structure and register your taxi business.

Research the following business structures and try to decide on the option which will best suit you and your taxi business. Take time to understand the advantages, disadvantages and differences between each of your options:

Sole trader: If you set up your taxi business as a sole trader, you’ll be the exclusive owner, keeping all post-tax profits. The downside to this business structure is that there is no separation between sole traders and their businesses – making the owner personally responsible for any losses their business may make. Sole traders need to register for self-assessment to pay their taxes to HM Revenue & Customs (HMRC). Bear in mind that this is the most popular choice for the vast majority of taxi drivers – although that doesn’t mean it’ll necessarily be right for the circumstances of you and your taxi business.
Partnership: A business partnership sees two or more people sharing the responsibilities, risks, profits and losses of a business. General business partnerships, limited partnerships and limited liability partnerships are the three kinds of partnerships. In all cases, the ‘nominated partner’ is responsible for filing the partnership tax return. If that’s you, then you must also register with HMRC. Bear in mind that all partners still need to submit their tax returns as individuals as well.
Limited company: If you choose to operate as a limited company, you will be legally and financially distinct from your taxi business. Operating as a limited company means you’ll have shares and shareholders. Setting up your taxi business as a limited company also means you’ll get to keep any post-tax profits. You can register as a limited company at Gov.uk.

» MORE: Should I register as a sole trader or limited company?

Before you can hit the road, there are a few legal and regulatory hurdles to starting a taxi business which you’ll need to consider. For one thing, you will need a taxi licence – and, obviously, a driving licence.

To apply for a licence to drive a taxi or PHV in the UK, you must:

have held a full British, Northern Ireland, or EU driving licence for at least 12 months. In some cases, the licensing authority will accept a foreign driving licence. You can check if you’re eligible on Gov.uk.
pass a Disclosure and Barring Service (DBS) check, which determines whether you are a ‘fit and proper person’. These checks include background and character checks as well as potentially enhanced criminal record checks.

In some cases, you will also need to pass a medical examination and take a driving test. London Black Cab drivers also have to take the Knowledge test to prove they know the name and location of every street, as well as the shortest and quickest routes between them.

As long as you’re eligible, you must apply to your local licensing authority to get your taxi or PHV licence. In London, this is Transport for London (TfL). Outside London, this is the local council.

You also need a vehicle licence to use your car as an official taxi or PHV. On top of that, PHV drivers need an operator licence.

The process is different for licences in Northern Ireland and licences in Scotland.

4. Fund your taxi business

You can get help buying your taxi with dedicated taxi finance, where you pay in monthly instalments rather than up front. You have several options, including:

Taxi hire purchase: You pay a deposit and then monthly instalments with interest over a set period. You own the vehicle at the end of the agreement.
Taxi Personal Contract Purchase (PCP): This involves an initial deposit, followed by fixed monthly payments throughout the agreement. At the end of the agreement, you can return the taxi, exchange it for a new taxi and start a new PCP contract, or make a final payment and own your taxi.

There are also other financing options to consider if you need seed capital for your taxi business. Research the options below and consider whether any (or a combination) of funding options would be right for your circumstances and your taxi business:

Personal savings: Using your own saved-up money will allow you to retain full ownership of your taxi business – provided you have enough to cover the cost of the vehicle and relevant equipment. If you go down this route, just be careful not to jeopardise your own financial health, and don’t invest more than you can afford to.
Friends and family: Funding your taxi business by borrowing money from friends and family is another option, although mixing personal and business relationships can be tricky. Consider drawing up a written agreement before borrowing any money or accepting a gift. One in five UK start ups are funded by inheritance money, while a further 19% of new UK businesses are funded by the founder’s parents.
Small business grants: There are reams of non-repayable and partially repayable start-up business grants across the UK – some of which may be a relevant option for your taxi business. Small business grants are also available for businesses in Scotland, Wales and Northern Ireland. If you are planning on using an electric taxi, you may be able to take advantage of the government’s green Plug-in Taxi Grant specifically for taxi businesses.
Government business loans: Various government business loans may be available to your taxi business, giving you the capital you need to get your wheels on the road.
Business loans: Traditional business lenders and providers of small business loans may be wary of lending to new businesses. Lenders generally take a cautious approach to new firms, preferring instead to lend to established businesses with a strong track record. However, it’s not impossible to secure a business loan as a start up, and you may decide to speak to a few lenders while you’re looking for backers for your taxi business.
Angel investors: These tend to be wealthy individuals looking to invest in new businesses in exchange for equity or convertible debt. More experienced business owners may invest in your taxi business and take a hands-on approach to mentoring you and helping you grow the business. However, angel investors will generally demand a minority business stake as the price of their backing.
Crowdfunding: This involves securing funding from many sources, typically lots of individual, small-scale backers, in exchange for rewards, such as equity or early access to products. Crowdfunding often takes place through an online campaign.

Once you have secured enough money to start your taxi business, you may need to open a business bank account to keep track of the funds. Opening a business bank account will also help you separate your taxi business finances from your personal spending.

If you decide to operate your taxi business as a sole trader – and assuming your bank allows it – you may be able to continue using your personal bank account for business transactions.

However, limited companies and partnerships are legally required to separate their personal and business finances.

5. Find your first taxi business customers

Most businesses secure their first customers off the back of a targeted marketing strategy. PHV drivers, and especially those offering a specialist service, may consider setting up a website and social media presence to help customers discover you.

However, if you’re a ride-hailing service, your trade is much more opportunistic, and there is little to be gained from a dedicated online presence. Just get out there and start picking up passengers.

How much do taxi businesses charge?

Taxi drivers charge different fares depending on their location, the time of day and the day of the week. Maximum taxi fares are set by local authorities, with night-time taxi journeys (between 10pm and 5am) and weekend journeys more expensive than daytime journeys (5am to 8pm).

To illustrate the cost of taking a taxi ride in London, here are some examples from TfL: a 6- to 13-minute journey will cost you £7.60 to £11.80 in the day, £7.60 to £12 between 8pm and 10pm Monday to Friday or on weekend daytimes, and £9 to £13 at night.

A 28- to 40-minute journey would cost you from £31 to £39 Monday to Friday daytime, and £38 to £42 Monday to Friday evenings, nights, weekends and public holidays.

On the other hand, PHV fares are not regulated by local councils, though some choose to have a meter fitted and often base their fares on those set by the local authority. As a PHV driver, you or your operator must agree on a fee with the passenger before the journey starts.

Finally, we should mention that you can generate your advertising revenue by using your vehicle as a mobile billboard. This can be achieved through a digital taxi top display or wrapping your entire car chassis. Even the fold-up seats inside your car are an advertising opportunity. Brands pay between £50 and £5,000 depending on the size of the advert.

» MORE: How to start a car rental business

Image source: Getty Images

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