How to start a taxi business

Starting a taxi business could offer you the opportunity to become your own boss while providing valuable transport services to the public.

As of July 2023, there were over 289,000 opens in new window licenced taxis and minicabs in the UK.

Although the number of licenced drivers dipped in 2022 opens in new window, the demand for ride-hailing and taxi services is expected to increase opens in new window between 2023 and 2027.

Find out how to start your own taxi business, what equipment you’ll need, and what legal requirements are involved.

 

Different types of taxi businesses

The two most common types of taxi business are public hire and private hire.

Public hire taxis accept both pre-booked and fare journeys, and can be flagged down in the street or found waiting in designated taxi ranks.

Private hire taxis (also known as minicabs) exclusively accept pre-booked journeys and are not allowed to pick up passengers on the street who have not pre-booked.

You may also want to consider the business model opens in new window of your taxi business – do you want to be a self-employed driver, or do you want to hire and manage several drivers as part of starting a taxi business?

Both have a number of benefits and approaches you may need to consider before deciding.

 

What business research do I need to do?

When looking to start your own taxi business, business research opens in new window can help you define which services you should provide and what established competitors are doing opens in new window.

You may want to use your research to find a niche opens in new window for your taxi business to fill – such as airport shuttling or safe nightlife transport.

Business research could tell you more about your target customers opens in new window, such as where they are located and when they most commonly use taxi services – potentially making marketing your business more effective.

By conducting business research before moving ahead with your taxi business plans, you could increase your chances of start-up success.

 

Taxi business legal requirements

In order to run a legitimate taxi business in the UK, there are a number of legal requirements opens in new window you must fulfil.

Like every other vehicle driver in the UK, you must have a valid UK, NI or EU driving licence and have had it for at least 12 months.

You may also need a business licence from your local council as a taxi business or private hire. Before starting, you’ll need to check licencing and operation requirements with your local council, and operational conditions can vary by location.

When applying for a licence with your local council, there may be specific eligibility criteria you must meet, such as age and if you have the right to work in the UK opens in new window, as well as undergo character checks.

The age you must be to operate a taxi business varies depending on where in the UK you are based.

There are additional requirements if you wish to be licenced inside London opens in new window or other cities.

These additional requirements may include undergoing an advanced DBS check and medical evaluation, as well as completing a topographical skills assessment if applying for a private hire licence.

 

What equipment do I need to start a taxi business?

You will need a safe, road-worthy vehicle suited to passenger transport.

Your vehicle must be registered and have the correct business licence.

If you own a vehicle, it is up to you how you use it, including as a taxi, but it will affect your insurance.

However, if you are leasing a vehicle, it is unlikely that you would be able to use the vehicle as part of your taxi business unless it was first agreed with the owner in your lease contract.

With card payments being more popular opens in new window than cash, it could be a good idea to have a card payment system in your taxi to provide a more convenient payment method for customers, alongside accepting cash.

Other equipment could include dashcams (for insurance and safety purposes), digital GPS displays, taximeters (for fare journeys), a dedicated phone number for customers, cleaning equipment, privacy screens, vehicle maintenance, and dispatch software.

You may also want to consider having an app opens in new window that could make it easier for customers to use your services.

Many of these are available in modern smartphones – and many minicabs will use ride-booking apps and included GPS maps to operate their business.

 

How to fund a taxi business

The most common reason why start-ups fail is because of a lack of funding opens in new window.

Funding a taxi business can include financing vehicles, vehicle maintenance, licences and fuel – and costs can vary depending on which type of taxi business you run.

One of the most common forms of start-up financing is a small business loan opens in new window, but other options can include self-funding, friend and family loans, a personal loan opens in new window, and crowdfunding opens in new window.

Start Up Loans is an alternative option to a bank loan – a government-backed scheme that can provide small business owners with a personal loan from £500 up to £25,000 with a fixed 6% annual interest rate.

Find out more about applying for a Start Up Loan opens in new window.

 

Attracting customers – marketing strategies

If you have decided to start a private hire taxi business, marketing opens in new window can play a role essential in getting it on the road to success and turning a profit.

Without marketing your taxi business to your target customers, it’s unlikely they will know your business exists alongside your competitors.

You could consider a number of marketing methods depending on your marketing budget, including social media marketing opens in new window, PPC advertising, local SEO opens in new window, flyers, social media ads opens in new window, encouraging referrals (with incentives such as discounts on future journeys), and being listed in directories.

Consider creating a website showing the areas your taxi business covers, typical pricing for popular routes, and an online booking system to handle customers.

Read our guide on how to market your business on a shoestring budget opens in new window.

 

Learn with Start Up Loans and help get your business off the ground

Thinking of starting a business? Check out our free online courses in partnership with the Open University on being an entrepreneur.

Our free Learn with Start Up Loans courses opens in new window include:

Plus free courses on finance and accounting, project management, and leadership.

 

Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

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