How to start a taxi or private hire firm

Starting a taxi business can be a flexible, fulfilling, and lucrative venture, whether you’re looking to work independently or recruit a team.

However, this doesn’t mean the path to success will be smooth. The UK taxi industry is currently facing a fork in the road, with its market size shrinking 3.4% in the last five years due to the proliferation of ride-hailing apps like Uber, Bolt, and FREENOW. Local firms can avoid being left in the dust, though, especially if they have a strong unique selling proposition (USP) capable of cutting through the competition.

Whether you’re intent on taking the traditional path or joining forces with ride-sharing companies, this guide explains how to start a business in the transport-for-hire industry in digestible steps. We also cover the costs and challenges associated with starting a taxi company, to help you get your business on the road without any false starts.

Taxi firm vs private hire company: what’s the difference?

In the UK, for-hire transport services primarily fall into two models: taxi firms and private hire companies.

A taxi firm, also known colloquially as ‘Hackney carriage’ firms, refers to a business that operates vehicles licensed to “ply for hire”. In layman’s terms, this means the firm’s vehicles are able to be hailed on the street by a passenger, booked at designated taxi ranks, and potentially, pre-booked by telephone. 

They operate locally, with a central point of control coordinating bookings, dispatching vehicles, and assigning vehicles. Taxi firms also typically use a meter to set their fares, and prices are regulated by local authorities based on factors like distance travelled and time spent in the vehicle.

Private Hire Vehicle (PHV) companies like Uber or Bolt, on the other hand, entirely rely on pre-booked rides. Drivers cannot operate from taxi ranks, or accept passengers flagging down services on the street.

Private ride operators are less centralised than taxi firms, as drivers tend to be independent contractors, operate autonomously, and are responsible for using their own cars. These apps also often leverage more sophisticated software to manage logistics and calculate prices using an algorithm, as opposed to the meter systems used by traditional taxis.

Is it profitable to start a taxi business in the UK today?

Starting a taxi business can definitely be a profitable venture in 2025, but the journey won’t come without roadblocks.

The cost of starting a taxi business isn’t cheap. Annual taxi insurance rates range from £1,500 to £3,500, while fuel prices tack on another £150 to £500 per week, per driver, on average. As the UK continues to push for zero-emission taxi fleets, taxi companies are also required to splurge more on vehicles capable of meeting EV requirements. 

What’s more, it shouldn’t come as a surprise that demand for traditional taxi services is stalling. As PHVs become the go-to option for many passengers looking to take a ride, the Hackney Carriage has taken a hit, with the number of licensed taxis in England decreasing 1.4% YoY in April 2024. 

However, while app-based services tend to be preferred by casual riders, demand is consistent for more niche transport categories like airport transfers, school runs, and NHS contracts, opening up opportunities for taxi firms with more specialised offerings. 

While you’re unlikely to become the next Uber overnight, it’s also possible to set up a PHV company in the UK. Therefore, just like with starting a traditional taxi firm, there’s a good chance that you’ll still be able to carve out a profitable segment by focusing on contract-based services, leaning on local knowledge, and delivering strong customer service.

How to start a taxi or private hire business in 6 steps

You can’t go from 0 to 60 mph when setting up a taxi business. The process involves careful planning, upfront investments, and diligent compliance with UK regulations. Navigate your journey with ease using the steps below.

Step 1: Choose your business model 

First, you’ll have to decide how you want to earn your money. If you aren’t ready to jump in the deep end and set up your own traditional or PHV company, other business models are available. We cover the benefits and drawbacks of the three main options below. 

Own a fleet and hire drivers

If you’re looking for a high-profit ceiling and full control over the quality and branding of your service, you could set up your own taxi company. 

This would involve acquiring and maintaining a fleet of vehicles and employing or contracting drivers to operate these vehicles on behalf of your company. This approach is by far the most scalable, but it also requires significant capital investment, and you’ll be fully responsible for all areas of operations.  

Drive yourself as a solo operator

Operating solo will significantly lower your overheads, and you also won’t face as much administrative red tape. After expenses, you’ll be able to keep 100% of your earnings, and you’ll also be able to work flexible hours. 

On the downside, your earning potential will be capped by the hours you drive. This limits the scalability of this model and may leave you more financially vulnerable during non-working periods like sickness and holidays.  

Use ride-hailing platforms like Uber and Bolt as a stepping stone

Popular ride-sharing apps actively recruit drivers to work for them on a third-party basis. The platforms handle all parts of the customer acquisition and booking process for you, reducing the time and effort involved with managing these processes yourself. This option also has the upshot of offering drivers consistent demand, as well as the agency to manage their own schedule.

However, while this option offers the lowest possible barrier to entry, you’ll have to contend with high driver competition, as well as high commission fees, with these apps deducting around 20% to 25% from your total earnings. 

Step 2: Create a business plan 

The success of any business hinges on a solid business plan. This document will act as a compass for your taxi business, giving you a clear vision and strategy, supporting you with decision-making, and importantly, helping you gain access to crucial funding. 

Ensure your business roadmap is watertight by including the following elements:

• Costs: paint a clear picture of associated costs, including the price of vehicle acquisitions, licensing fees, insurance premiums, fuel or charging costs, vehicle maintenance, and more. 
• Pricing model: define how you’ll be generating revenue. For PHV companies, this will involve setting your own fares, likely utilising dynamic pricing during peak demand. For traditional taxi firms, bear in mind that maximum fares are set by local councils. 
• Driving structure: outline your employee structure. For instance, are you going to be employing drivers directly or working with self-employed contractors?
• Customer base: define your target audience clearly. Will your core customer base be casual riders, corporate clients, or parents carrying out the school run? Be as specific as possible during this step.
• Software needs: outline which software your business will rely on for operations. Depending on the nature of your venture, examples could include a booking and dispatch system, GPS tracking for real-time updates, and payment processing solutions. 

First time writing a business plan? Rest assured, while the process may seem overwhelming, you don’t need to start from scratch. Our guide to how to write a business plan offers free templates, alongside useful advice to get you started. 

Step 3: Apply for licences

To ensure your business is fit for the road, you’ll have to obtain the correct permissions from your local council. While specific requirements may vary between authorities, you’ll likely need to secure the following:

• Operator licence: you’ll need this licence if you’re running a PHV company that takes bookings and dispatches vehicles. To apply, you’ll need proof of address, public liability insurance, and a basic (Disclosure and Barring Service DBS check) for the licence holder. 
• Specialised driver’s licence: every employee planning to get behind the wheel will need to apply for a taxi or PHV driver’s licence. This licence will be issued by your local authority and requires drivers to have held a full UK driving licence for a minimum of two to three years.
• Vehicle compliance: every vehicle operating in your business will be required to display licence plates issued by the council. This license will demonstrate that your vehicles adhere to age limits, are potentially wheelchair accessible, are safe to drive, and comply with environmental mandates.
• Enhanced DBS check: all taxi and private hire drivers will need to undergo an enhanced DBS check to assess their criminal record, ensure that they are fit to hold a licence and interact safely with customers.

Step 4: Sort your vehicles and insurance

Your vehicles will be the bread and butter of your business. So, acquiring the right ones and ensuring they are properly insured is paramount. 

You’ll have two primary options when it comes to sourcing your fleet: owning your vehicles outright or leasing them from a third party. Owning gives you full autonomy over your vehicles, but requires a substantially higher upfront investment if you don’t plan on using a car you already own. 

Leasing, on the other hand, will involve much lower startup costs and ongoing maintenance responsibilities, but this option doesn’t allow you to build equity. 

Regardless of what option you pursue, all vehicles will need to pass regular MOTs. You’ll also have to protect your vehicles legally with “Hire and Reward” insurance, which will cost around £2,000 per vehicle, per year.

Finally, with transport authorities like Transport for London (TfL) already mandating that all new PHVs must be Zero Emission Capable, it might be wise to future-proof your vehicles by opting for a hybrid or fully electric vehicle. 

Step 5: Build your booking and dispatch system

If your customer service isn’t on point, retaining customers will be an uphill battle. Fortunately, leveraging the right software systems will help you manage client relationships smoothly, even when you aren’t there in person.

For example, solid dispatch software will allow you to manage fleets in real-time and assign jobs effectively based on driver location and availability. User-friendly booking apps also give customers a convenient place to request and pay for rides, and receive real-time updates, while smaller operations may be able to use WhatsApp to handle simpler booking requests. 

If you’re serious about delivering top-tier service, customer relationship management (CRM) software can be used to streamline bookings and improve driver-to-customer communication. By acting as a central hub for customer data, these systems give taxi companies the information they need to understand client needs better and tailor their services accordingly.  

Compare the best solutions in our in-depth guide to the best CRM systems for small businesses.

Step 6: Market your taxi business

Once your taxi business is on the road, you need to develop strategies to get the word out.

Most of your target customers will be local to your area. So, for any transportation for-hire business, local marketing will be king. While it might seem old-fashioned, promoting your business with print marketing is one of the best ways to reach out to potential clients directly. This could involve distributing business cards or flyers in local businesses, or even applying eye-catching vehicle wraps for mobile advertising.

To capture the attention of online browsers, utilising your Google Business Profile is also non-negotiable. By optimising your profile with up-to-date information, a verification badge, and positive reviews, you’ll be far more likely to secure a premium spot in local search results. 

Marketing your company on Facebook also gives you the chance to target specific customer segments in your area. You can even time ads so they run during specific events in your area, to capitalise on peak demand for transport in your local community. 

How much does it cost to start a taxi business? 

There are a variety of upfront and ongoing costs involved with setting up a taxi business. 

For a newcomer, total upfront costs can range anywhere from £7,000 to over £100,000, with the overall overheads depending on a variety of factors, including the model you operate by, the size of your business, and where you’re operating. 

To give you a benchmark of how much you can expect to pay, here’s a breakdown of some key costs:

• Vehicle: your vehicles will be the biggest expense. A suitable petrol-powered car can cost anywhere between £15,000 to £30,000, while EV vehicles are likely to cost slightly more at £25,000 to £40,000+.
• Licensing: your Private Hire Driver’s Licence covers essential requirements like DBS checks, medicals, and tests, and can cost between £400 to £500 for a three year period, while a Private Hire Vehicle Licence costs £250 to £350 annually. For those setting up a PHV company, an operator licence costs anywhere from £500 to £1,500 and lasts for a maximum of five years. 
• Insurance: you’ll need specialised hire and reward insurance to set up a taxi business. Annual coverage costs anywhere from £1,500 to £3,500, depending on the vehicle and driver history. 
• Equipment: extra equipment like a dashcam, mobile phone, phone stands, and chargers can easily add around £100 to your total sum. Traditional taxis also require a metered system, which costs anywhere from £150 to £420, depending on the model and provider.

If you’re looking to cash in on the on-demand travel market without steep upfront costs, apps like Uber offer a lower barrier to entry. These popular ride-sharing apps act as the licensed operator, reducing administrative headaches and initial investments for drivers. You’ll only have to cover the costs of your individual PHV and vehicle licences.

Get your taxi business into gear

Demand for traditional taxis may be slowing down, but it’s still possible to outmanoeuvre the competition in 2025. With the right business model, industry knowledge, and the support of your local community, you still have ample chances of getting your taxi company on the right track.

If competing with dominant ride-sharing apps seems like too much of an uphill battle, you can also consider joining forces with platforms like Uber, Bolt, or FreeNow. Becoming a third-party contractor gives you opportunities to earn without investing too much. You also gain flexibility over your schedule, making it a good stepping stone to understanding the on-demand transport market while you explore other entrepreneurial ventures.