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How to start a taxi or private hire firm

Wondering how to start a taxi business? Get your startup moving with our dedicated guide

The process of starting your own taxi business is worlds away from what it would have been just a decade ago.

In an industry now defined by the disruptive antics of ride hailing and on-demand taxi apps, even the humble black cab has been unable to resist the digital revolution.

According to the Department for Transport, as of 2019, England was home to 291,800 licensed taxis and private hire vehicles (PHVs) – with the latter accounting for 76% of all licensed vehicles.

However, if you’re wondering about how to start a taxi company – be that a hackney taxi or a private hire vehicle – then know that this still offers a viable business opportunity. In 2019, the total revenue in the UK taxi industry was £9bn, according to data published by IBISWorld.

Taxi service or private hire firm?

Here, we explain the differences between black cabs and private hire vehicles.

Taxi service

Hackney carriages (taxis, black cabs) are able to pick up people off the street without a prior booking. Mostly found in urban areas, black cabs are highly regulated, with fares controlled by local councils and numbers restricted by many local authorities.

Drivers of black cabs are essentially self-employed, and have to go through rigorous checks and tests before they are awarded their license. Although some Hackney carriage drivers form co-operatives and switch their cars to saloons and other models, the majority of these taxi drivers can be found in their black cabs, trawling the streets for customers with their orange light on.

Private hire firm

Private hire vehicles (PHVs), or minicabs, must have a prior booking when picking up passengers. Usually linked by a radio circuit and operating out of similar types of cars that are branded in the same way, minicab owners face stiff penalties if they are found touting their business to random people on the street.

It is possible to mix fleets, with hackney carriages undertaking private hire tasks alongside standard minicabs. However, remember that while it is possible for black cabs to be used for private hire, doing the same thing in reverse (i.e. using private hire vehicles as hackney carriages) is against the law.

Become a taxi driver: Tests, licensing and regulations

Before starting your own taxi company, you yourself must become a fully licenced driver. The process you’ll need to go through depends on where in the country you’ll be operating your business.

Outside of London, you must apply to your local council for a taxi or private hire vehicle licence. In London, TfL handles licences – taxi and private hire licences are processed separately.

To be eligible for a taxi or PHV licence in the UK (outside of London), you must:

  • Apply to your local council
  • Meet the eligibility criteria, e.g. right to work, driving licence, character checks

TfL handles applications in London. In order to be eligible to apply to drive either a taxi or private hire vehicle in London, you must:

  • Be aged 18 or over (though you cannot be licensed until you are 21)
  • Hold a full driving licence from the Driver and Vehicle Licensing Agency (DVLA), Northern Ireland, or another European Economic Area state
  • Have the right to live and work in the UK
  • Undertake an enhanced DBS check
  • Depending on if you apply for a taxi or private hire licence, you may need to undergo a medical examination. Learn more about the exemptions for taxi licences and private hire licence
  • Complete a topographical skills assessment (for private hire licences)

If driving a taxi in London, you’ll also need to pass the Knowledge of London. In order to pass this test, you must learn and memorise the streets landmarks that are within a six mile radius of Charing Cross – there are thousands of them!

TfL can either grant a licence for the whole of the Greater London area, or for one or more of London’s nine different suburban sectors.

For more information, take a look at our dedicated guide to taxi driver regulations.


How to write a taxi service business plan

If you’re planning to operate as a self-employed taxi driver, compiling a business plan might not be top of your priority list. However, it’s crucial to work out whether starting a taxi business will actually be a viable – and profitable – option for you.

Your business plan should answer the following questions:

  • What type of service (i.e. taxi or private hire) will you be offering?
  • What hours can you work?
  • What equipment and other outgoings will you need to budget for?
  • Will you start with, or work towards, operating a fleet? 
  • If you plan to operate a fleet, think about the balance between the extra costs and potential for additional income that comes with managing multiple cars

Make sure to draw up a thorough business plan, detailing:

  • The market you’re entering
  • Expected startup and ongoing costs (e.g. buying a cab, GPS software, radio equipment, and petrol – consider using fuel cards
  • Your potential earnings (how much will you charge for fares to ensure profitability?)

Download our free business plan template to help you get started.

Abi Hussain, transport manager at Cabzilla comments:The process of writing a business plan was an arduous one. We had many factors to consider, including our premises – where would we be based? Who would drive for us and where would we find them? 

“We also had to consider licensing costs and insurance, as well as completing a competitor analysis, a market analysis (which was vital in what was already a saturated market) and financial forecasting.”


How much do taxi drivers earn?

The average salary for taxi drivers in England is £475 per week, according to data published by Indeed.

Conduct market research for your taxi and private hire firm

Conducting extensive competitor research in your area will enable you to figure out where there’s a gap in the market for a new taxi service. This could be an under-served area of town, or a niche that has yet to be exploited by other taxi companies.

The internet has also given people a huge platform to air their grievances about however they think they’ve been wronged by a business or organisation. Use this to your advantage – look online at reviews of taxi businesses in your local area to see what complaints customers have, and think about how you could improve upon their service.

In addition, think about the area that you’ll operate in, how much you’ll charge passengers for trips, and the type of service that you’ll run.

Essentially, when researching the market for your taxi or private hire firm, you’re looking for gaps in the market. For example:

  • Is there a rural area that’s currently under-served, and that could benefit from a focused service?
  • How much competition is present in urban areas with high populations?
  • How many rideshare users are in a certain area? Do Uber or other firms operate there?

What area will I operate in?

Where you live will tend to determine where you operate, so use your local knowledge to help identify business opportunities. For example, there could be a certain part of town that provides a steady stream of passengers. You could also identify areas that aren’t well-served by public transport, which could mean people in need of taxis. Similarly, big, out-of-town pubs and clubs could also offer the potential for plenty of customers.

Alternatively, consider setting up a taxi company away from where you live. Use your outsider’s perspective to see where a taxi service could be the most helpful. Be sure to spend time in potential areas, and look out for peak travel times.

How much should I charge passengers?

The amount you can charge passengers will depend on the type of service you offer (i.e. taxi or PHV), as well as your location. Taxi fares are regulated and set by local authorities, whereas PHVs are free to set their own prices.

Taxi fares in London

Below is a rough guide to taxi fares in London. A minimum fare of £3.20 is applicable at all times. 

taxi fares in london

Source: TfL

At the end of the trip, your passenger must pay the full fare displayed on the meter, unless otherwise agreed. 

As a taxi driver, you are obliged to accept any fare up to 12 miles in distance or one hour in duration, provided the end destination is within Greater London. 

The exception to this is if the passenger is picked up from Heathrow Airport, in which case you must accept a distance of 20 miles. Journeys that start from Heathrow Airport also incur an additional £2.80 charge.

If a passenger soils your taxi to the extent that you have to take it out of service for cleaning, you may charge the passenger up to £60 as a penalty.

PHV fares

For PHVs, fares are usually agreed on before the journey. PHVs are not subject to the same regulation as taxis, and do not need a fare meter or conform to fare tariffs set by the council. 

As a PHV driver, you are required to give an accurate fare estimate before the start of any journey with a passenger, or agree on a fixed fare. Fares are typically based on distance travelled.

What type of service will I offer?

According to data published by the Department for Transport, in its Taxi and Private Hire Vehicle Statistics, England: 2019 statistical release, in 2019, there were 70,600 licensed taxis in England – a 3% decrease from 2018. London experienced a 4.2% decrease, compared to the 2.5% decrease experienced across the rest of the country.

As of 2018, the average satisfaction rate for taxi passengers was 68%. However, rural areas experienced the lowest overall satisfaction, at 64%.

As the research shows, this underwhelming level of satisfaction in rural areas could make the case for improving the taxi offering, with a hyper-local taxi service in such locations.

In the end, it comes down to whatever’s convenient for you as a driver. Obviously moving location may not be feasible, but think about the different options below to see what might make the most sense.


Financing your taxi or private hire business

Licences, cars, equipment – these are just some of the items you’ll need to budget for when running a taxi service. 

When you think about financing a business, you might consider using your savings, or borrowing money from family members. However, there are a number of alternatives available to you. For instance, you can consider comparing business loans, or using a specialist taxi provider to finance a vehicle. 

When you are up and running, you’ll need to manage your finances. Ideally, you should use a business bank account to manage earnings and outgoings for your business specifically. If you start a limited company, you must have a business bank account.


Pay the right tax for your business

Certain expenses – like vehicle insurance, repairs, and fuel – can be claimed as allowable business expenses. 

You may be able to claim capital allowance if you buy a vehicle, depending on the type of accounting (i.e. traditional or cash-based) that is used. You may also be eligible to pay VAT.

As well as this, you’ll have to factor in emissions-based vehicle tax. The amount you pay depends on when the car was first registered, and the amount of emissions it creates.

Learn more on our dedicated taxi driver tax page.


Get the right taxi insurance

As you’ll be spending more time on the road and carrying a procession of passengers, there’s an increased risk, and so you’re legally required to have taxi insurance. Generally, taxi insurance is more expensive than standard car insurance. 

A number of factors can contribute to how much taxi insurance you’ll need to pay. These include:

  • Car size and insurance group
  • Miles driven in a year
  • Security devices
  • Accessible features

Read our ‘how to get the right taxi insurance’ guide for more information.


Concept, branding and design

If you’re already working as a taxi driver for another company but want to strike out on your own, use the information and expertise you’ve gained from this experience to create a taxi service that’s truly unique.

If you’re new to the sector, consider talking with experienced drivers and owners to better understand how the business works, and the aspects you’d need to think about when creating your own concept. 

How to name your taxi service

Whilst most self-employed drivers won’t need to be concerned with taxi business names, a private hire firm with multiple vehicles would certainly benefit from creating a strong brand.

If you’re in a small local area, this could be as simple as naming your taxi business after that location, which will also help it to be visible in online searches. Building a strong reputation as a reliable service will rely on consistent and obvious branding across your vehicles, as well as a minicab website so people can discover you online.

How to find your niche

The market is a competitive one – and finding some kind of niche that your service will cater to will be important if you want to stand out. Potential ideas could be:

  • City centre 
  • Suburban service
  • Airport service
  • School taxi
  • Club run
  • Female-only drivers
  • Eco-friendly vehicles

Ensure you meet the requirements for your particular service – for example, if you want to work with children, you’ll need an enhanced DBS check.

Taxi business for sale

Alternatively, if you’re interested in running an entire fleet of vehicles, look out for an existing minicab office that’s for sale, and think about purchasing a ready-made business.

Naturally, you’ll want to look at the business’ turnover and the reason why it is being sold, and make sure you actually have the sufficient capital to buy it. 


Premises

When setting up a private hire firm, note that nationally accepted regulations state you must identify an ‘operating centre’. To do this, you must apply for a private hire vehicle operator licence either for inside London or outside London, depending on your business.

If you are able to afford a physical premises for your taxi operating centre, make sure it is close to where your main customer base resides. Your operating centre should be easily accessible to customers who wish to walk in and make bookings, as well as call or book online. 

As trade is often brisk on Friday and Saturday nights, a private hire office in a town centre, close to restaurants, bars, and entertainment venues, will offer a prime location to attract late night revellers – as well as passing customers during the day. 

Have a look at other taxi offices in the area you want to operate in. Premises are usually small retail units, with enough office space for the dispatch/control team. You’re likely to start by renting a space, then once your business is more established, you might consider purchasing a unit.


Taxi equipment

Here, we take a look at the key pieces of kit you’ll need when starting your own taxi service. While a car is the most obvious thing you’ll need, you’ll also require taximeters for licenced taxis. We’ll also highlight how vehicle tracking solutions can benefit your business.

Card machines

The modern taxi driver can’t just rely on taking cash payments from passengers. As physical money continues to lose ground in the payments space, you’ll risk losing out on all kinds of fares if you don’t accept card payments. 

In fact, from October 2016, it has been a requirement for London taxis to accept card payments and provide printed receipts. So, if you’re planning on operating in the capital, you must install a TfL-approved card payment device in the passenger compartment.

You can learn more and compare your options in our guide to taxi card payment systems. 

iZettle for taxi drivers

iZettle offers TFL-approved card readers and is popular with UK taxi drivers

Fleet management and vehicle tracking devices

There’s a lot to manage when operating a car for a taxi service. This includes how much fuel it’s using, its location, planning the best routes, and ensuring the car is being driven safely. This is true if you’re running one car, or one hundred. 

GPS is an essential part of effective taxi fleet management. A vehicle tracking solution brings a host of benefits for taxi fleets – it enables drivers to log jobs and receive directions, and allows fleet managers to manage vehicles and track driver behaviour including accelerating, braking and engine use. This in turn allows you to: 

  • Improve customer response times
  • Reduce fuel costs
  • Reduce number of accidents
  • Get accurate data
  • Avoid congestion charges

Basic models include route planning and speed alerts. Meanwhile, more advanced models can provide highly accurate traffic information, intelligent route planning, and compatibility with Siri.

Autocab Taxi tracking

Autocab has more than 25 years of fleet management experience. Its Ghost Cloud Booking and Dispatch software offers the following features:

  • Receive and dispatch multiple jobs in real-time
  • Pay for the licence fee on a weekly basis
  • Scalable system capacity
  • Hosted on Microsoft Azure
  • Anytime access via an internet connection

Prices are available from the Autocab sales team upon request.

Digital Dispatch

Digital Dispatch provides dispatch, booking, and fleet management software – as well as payments solutions – for small to very large fleets. This software includes the following solutions:

TaxiBook

  • Hosted, cloud-based system
  • Automated features, e.g. regular bookings or future journeys
  • Charged monthly
  • Process card payments in vehicles
  • Use a mobile data terminal or Android mobile device
  • Dispatch, map, and track vehicles

PathFinder

  • Designed for fleets of 100 to several thousand vehicles
  • Cellular Public Data Networks (PDN) and Private Mobile Radio (PMR) are supported
  • Ideal for use across multiple companies
  • In-vehicle mobile data terminals are available 
  • Reporting and statistics 
  • Passengers can use self-service to book

MTData Taxi tracking Software

  • Self-hosting or cloud-based solutions
  • Web booking and call-taking software
  • App for smartphone booking available
  • Payment system
  • Driver portal training
  • SnapShot camera
  • Taximeter integrates with dispatch and tracking system
  • Management dashboard

Envoy Taxi Booking Dispatch & Management Systems

  • All-in-one software – book, dispatch, and manage fleets 
  • Cloud-hosted
  • Pay-as-you-go pricing structure
  • Caller ID
  • SMS confirmation of booking and taxi arrival
  • Booking planner
  • Auto and manual dispatch
  • Reporting, accounting, and management 
  • Driver apps available

Dash cams

Offering the ability to record the road in front of (and potentially behind) a vehicle, dashboard cameras are a useful addition to a taxi car. 

Dash cams can offer the following benefits:

  • Protect drivers in case of an incident or insurance claim
  • Promote careful driving
  • Potential for discounted insurance

If you’re thinking about getting a dash cam, be sure to research the laws and rules regarding them. There are certain requirements that may have to be met, both for passengers and drivers. These include:

  • All passengers should be informed when a dash cam is in use
  • You must be parked and stationary to interact with a dash cam – it’s illegal to do so while driving
  • It must be fixed behind the rear-view mirror so as not to obstruct your vision

Buying a black cab

The London Electric Vehicle Company (LEVC) – formerly the London Taxi Company – makes black cabs, which are some of the most recognisable vehicles in the world. As a taxi driver, you can drive a taxi made by the LEVC at its Coventry base. 

2017 saw the introduction of the new electric black cab, the TX, which is capable of driving purely on electric power. As of January 2018, all taxis that are presented for licencing need to have zero emissions. 

There is a rule stating that taxis must be less than 15 years old. This is in an attempt to remove diesel models from London’s roads by 2025.

TX taxi features:

  • Available from £183 per week, or £70,473.40 total
  • Space for six passengers
  • Has a range of 377 miles

There are two types of warranty available: standard and extended.

 Standard warrantyExtended warranty
CostIncluded£649
Whole vehicleThree years/120,000 milesFive years/150,000 miles
Drive batteryFive years/unlimited mileageFive years/unlimited mileage
Drivetrain (exc. drive battery)Three years/120,000 milesFive years/150,000 miles

You can view a full breakdown of costs on the LEVC’s taxi cost calculator page. As well as this, the LEVC offers driving tips for the TX to help ensure that you’re getting the most from the car.

You can also buy or rent a range of approved used taxis from the LEVC, With cars are available from £31,500. Although you can buy a used black cab from elsewhere, buying from LEVC will give you confidence that the vehicle has gone through stringent checks and has all the requisite features.

Paul Poulten, a self-employed black taxi driver, says that when looking for a black cab to buy, you should consider:

  • Comfort – you’re going to be spending many hours of the day sitting in that driver’s seat, so make sure it’s a place you like sitting
  • Hybrid engine – 2017 saw the introduction of the new electric black cab
  • Build quality – give any vehicle a thorough inspection before buying. Check it’s passed its MOT, and enquire about any previous issues or repairs it may have had
  • Accessibility for all – every licensed London taxi should be wheelchair accessible, and include:
  • A ramp
  • A swivel seat
  • An intermediate step
  • Grab handles
  • Floor lighting
  • A hearing aid induction loop
  • Space for assistance dogs (at no extra charge)

Cars for PHVs

What makes a car a suitable PHV? Unlike a black cab, you could technically use any kind of car, but there are still a number of considerations you should bear in mind to make sure you’ve got the right vehicle for the job. Some boroughs and local councils also require taxis and PHVs to have a certain seat width or engine size.

The car will also obviously have to be deemed safe. Here’s what you should consider before choosing which car to use as your PHV:

  • Reliability – choose a car that’s known to run smoothly with little maintenance, and slim chance of a breakdown
  • Safety – the sheer amount of time you spend in a car increases your chances of being involved in an accident. Choose a car that’s been rigorously safety tested
  • Cost – this depends on how much you have to spend, but it’s probably sensible to start with a pretty affordable car
  • Number of seats – do you want to be able to transport eight people, or just three?
  • Luggage space – if you’re likely to be picking up passengers with lots of luggage (such as from the airport), then boot space is a critical consideration. You don’t want to miss out on a fare because you don’t have enough space
  • Manual or automatic – whilst manuals tend to be more efficient, if you’re going to be stopping and starting in traffic all day, an automatic will offer an easier and smoother experience
  • Features – as a PHV driver, you are not required to do the Knowledge. This means that a sat-nav could be a good idea to ensure you can get from A to B in the quickest time possible
  • Engine – your main considerations will be CO2 emissions (the lower these are, the less VED tax you’ll pay) and fuel economy

Remember: Under TfL rules, as of April 2019, diesel cars that do not meet the latest emissions standards will face a daily charge of £12.50 to drive in the centre of London, under the 24/7 Ultra-Low Emission Zone.

Taximeter

A taximeter is a crucial piece of kit. Mounted in the driver’s cab but visible to the passenger, it calculates and displays the fare as it increases over the distance travelled. 

TfL has some specifications for taximeters in London taxis, notably that it must:

  • Display the units of fare in pounds sterling (£) and pence (p)
  • Have display, markings, and instructions in English
  • Be stored in a sealed, tamper-proof device

Taxi roof sign

If you want to be easily identified as a taxi, you’ll need to make it obvious with a roof sign, or bright eye-catching lettering (or even both).These roof-mounted units can now be used as digital advertising displays, helping the driver generate additional revenue and attract more attention. 

Verifone’s TfL-approved Digital Tops run ads in HD. They have built-in solar panels to supplement your taxi’s battery power, and the ads are updated using 3G wireless technology.

Taxi radio

Depending on the setup of your taxi business, communication between your cars and your base is essential so you can discuss who’s attending to what fare at what time. If your fleet is using a radio system, you’ll need to get a licence from Ofcom

The Ofcom licensing centre issues operators with licenses to use radio equipment. You can apply directly to Ofcom either online or via post. 

If you want to find the perfect tracking solution for your business, simply complete our quick and easy quote comparison form


Recruitment

If you’re going to be operating a fleet, you’ll need to spend time hiring the right people to drive your vehicles. When hiring, you need to make sure your drivers:

  • Have the relevant licences
  • Are permitted to work in the UK
  • Don’t have a criminal record
  • Have completed the relevant medical and DBS checks

Failure to comply could land you or your employees in legal trouble. As with hiring any employee, a thorough background check of their employment history should flag up any potential problems.

Drivers will need to have the relevant driving licences, and to complete ‘The Knowledge’ for driving black taxis in London. Some local councils may require drivers to complete additional training. There are also training providers you could use for your drivers to ensure they drive to a high standard and follow best practice.


Promote your taxi business (and turn a profit!)

With several taxi firms jostling for supremacy in any one area, competition is inevitably high across the industry. New operators will often find themselves subjected to aggressive tactics by other firms, such as price undercutting. 

With hackney carriage price rates set by the council, private hire firms can operate a cheaper service, sometimes leading to a “them and us” animosity between the two sectors. However, there are a number of ways to promote your business, whatever type of service you offer.

Create a taxi business website

A website offers your taxi service a wealth of opportunities. In addition to standard details like contact information, areas covered, and available services, you can use it for customer service and booking trips. If you want to take bookings online, you’ll need a website that supports ecommerce.

Aside from operational functions, you can use a website to showcase your company’s personality, as well as news and customer testimonials. A website is also an ideal place to highlight what makes your service different from competitors!

If you’re unsure of what to do for taxi website design, there are plenty of web hosting services that can help you get started, or you could pay a website designer to do the work for you.

If you want to get a website today, compare web builders here to help you decide on the best one for your business. 

SEO

Having a good online presence will help local customers find your taxi website, as will making yourself active on local social media pages. Investing in search engine optimisation (SEO) from the start to ensure you rank highly for taxi searches in your local area will also give you a boost. If you’re new to SEO, you could hire someone to optimise your website.

Word of mouth

That said, it could still be worth forming relationships with local businesses – such as restaurants or bars – that are likely to have a steady supply of customers in need of a lift home. Leave your details with front of house staff, and let them know that you or your drivers are available. If the restaurant or bar is agreeable, you could leave a business card or leaflet on their noticeboard or front desk.

Taxi advertising

Black cabs are able to carry advertising and sponsorship on their cars, while modern taxis provide a wealth of opportunities for making money through advertising. You can wrap your taxi to such an extent that the whole chassis acts as a mobile advert.

As mentioned before, digital taxi top advertising signs can display different adverts on their screens through 3G, whilst in-taxi advertising digital display screens are becoming a common sight. There are many providers in the capital offering advertising services to some of the biggest brands in the world, who will only be too happy to buy up advertising space in your taxi.

Hussain says: “My advice to anyone looking to start up their own taxi business is to find a gap in the market – bring something special to the industry, exploit a niche that is yet to be filled, and always serve your customers well. Don’t commit to jobs you can’t fulfil, employ enough staff so you never have to turn down work, and most importantly – never turn your phone off!” 


Selling your taxi business

Whether you want to start a new, different venture, or retire completely, there could come a time when you want to exit the taxi game and sell your business.

Black taxis

Selling a black cab is not difficult, provided you’ve kept it in good condition. The LEVC offers a safe and regulated portal for selling your old vehicle – it will be put through a stringent 100-point check, and assessed by factory-trained technicians.

PHV firms

There are even online platforms for selling whole PHV operations. You’ll have to provide a number of details for prospective buyers so they can assess whether it’s a good business opportunity, including:

  • Location
  • Asking price
  • Turnover
  • Net profit
  • Number of vehicles
  • Reasons for selling
  • Years in operation
  • Lease terms and rent (if you have property)

Franchising your taxi business

If you’ve built up a considerable reputation as a taxi or private hire service in your local area, with a strong brand name and image, you could spread your business by franchising. 

You allow an interested party to pay for the privilege of using your brand name and image on their fleet, in exchange for your training and support. This way, you can expand into other locations without significant upheaval on your behalf – and with minimal costs, too.


Next steps

We’ve directed you through the key information to know and steps to follow to help you in your journey to running your own taxi or private hire firm. We’ve detailed the points to include in your business plan, the equipment you’ll need to budget for, and even how to grow your customer base.

The next step is to get going, and accelerate your ideas into reality! For more information, and to compare quotes for vehicle tracking, fill in the form at the top of the page.

Scarlett Cook
Scarlett Cook

Scarlett writes about a wide range of topics on the site, from business security to digital marketing and EPOS systems. She can also be found writing about diversity and sustainability in business, as well as managing the Just Started profiles.

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