How to Start a Taxi Business

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.

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.

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. 

Most self-employed taxi drivers in the UK run their businesses as sole traders. This is the business structure with the quickest and easiest set-up process since all you have to do is register with HM Revenue & Customs (HMRC). 

However, you also have the option of going into business as a partnership or setting up your taxi business as a limited company. These options can be more involved than being a sole trader, but each comes with its own advantages and disadvantages. For more information, including the details of how to register your business, check out our guide to choosing a business structure.

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.

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

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. 

There are also other financing options to consider if you need seed capital for your taxi business. From start-up loans to self-funding options, our guide to funding a new business lays out all the ways you can raise money for your cab company.

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. 

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.