How to Start a Taxi / Private Hire Business in the UK?

Starting a PHO (private hire operator) business in the UK offers promising opportunities, especially in bustling cities like London, Manchester, Birmingham, and Edinburgh.

However, success hinges on more than just having a fleet of cars and drivers. It requires strategic planning, adherence to local regulations, and effective operational practices.

As of April 2024, there were 313,008 licensed taxis and private hire vehicles in England, marking an 8.2% increase from the previous year and a 70% rise since 2005. (Source: GOV.UK)

This growth underscores the expanding demand for PHO services and the competitive landscape aspiring operators must navigate.

This blog outlines the essential steps to establish a successful PHO business in the UK.

From understanding the PHO market in the UK to financially managing and optimizing costs, we provide a comprehensive guide to help you decode “how to start a taxi business in the UK”.

And by the end of this blog, you will get a clear roadmap to start your own taxi business hassle-free.

Let’s begin.

How to Start a Taxi Business in the UK?

Starting a PHO in the UK requires careful research, planning, compliance with local regulations, and much more. Along with this, you also have to follow other essential steps that you may or may not know.

1. Understanding the PHO Market in the UK

The UK private hire operator (PHO) market has evolved significantly over the years, driven by urbanization, technological advancements, and changing customer expectations. Here's an overview of its evolution, current status, and key players:

Evolution of the UK PHO Market:

2000s Onwards: The rise of mobile apps and GPS technology transformed the industry, enabling customers to book rides conveniently and operators to manage fleets efficiently.

2010s: The introduction of companies like Uber disrupted the market, offering flexible pricing and expanding service availability.

2020s: The market continues to adapt, focusing on sustainability, regulatory compliance, and integrating electric vehicles into fleets.

Market Leaders:

Uber: A global leader in ride-hailing, Uber continues to dominate the UK market with its extensive network and user-friendly app.

Bolt: Known for competitive pricing and rapid service, Bolt has gained significant traction in various UK cities.

Addison Lee: Specializing in premium services, Addison Lee caters to corporate clients and high-end consumers.

The number of licensed PHV operators in England increased by 8.9% between 2023 and 2024 to 16,300, returning to the upward trend seen before the pandemic.

The evolution and the statistics clearly suggest that the demand for PHO services in the UK is on the rise, and businesses must follow the trends to cater to these rising needs of customers.

2. Business Pre-requisite (Market Research and Licensing Requirements)

Before diving into the business, thorough research and planning are essential. You have to get a proper understanding of the PHO market, the regulations, and its licensing requirements. Here is how you can start:

i. Market research: Study the demand for PHO services in your area. Identify your target audience: commuters, tourists, or corporate clients. Analyze competitors, their pricing, and services to spot gaps and opportunities. This insight will guide your business strategy.

ii. Licensing requirements: To operate legally in the UK, there are several taxi business licenses and legal requirements you must fulfill.

• For a driver's license, you will need a valid UK, NI, or EU driving license. And it should be at least 12 months old.

• For a taxi operator license, you must apply for a taxi business operator’s license from your local council. Rules may vary by location, so check all requirements carefully before starting operations.

• For a business license, you will have to be a registered business in your area and can legally run your business.

3. Vehicle Acquisition

Your fleet is the heart of your PHO business in the UK. The vehicles you choose will shape your brand and attract the right passengers.

i. Buying vs. Leasing: Buying offers long-term value but demands high upfront costs. Leasing provides flexibility and easier upgrades. Decide based on your budget and goals.

ii. Vehicle Types: Match your cars to your audience. Luxury saloons and SUVs work for corporate clients. Compact, fuel-efficient cars suit local commuters and airport transfers. Adding hybrids or EVs appeals to eco-conscious passengers.

iii. Financing Options: If buying feels costly, explore bank loans, leasing agreements, or hire-purchase plans. Pick the option that supports your growth strategy.

4. Implementing Taxi Dispatch Software

Till now, you have discovered all about offline activities. Now comes the key factor that has played and is playing a vital role in helping taxi companies like yours grow. No matter if you are in the UK, the USA, Canada, the Gulf, or any other country.

Implementing taxi dispatch software is key to running a smooth operation. Invest in a robust taxi booking software like Yelowsoft. This software also offers separate solutions such as;

• Driver app
• Passenger app
• Dispatcher app
• Admin panel
• Web booking

Also, Yelowsoft offers the following advanced features to automate and simplify the workflow.

• Reports and analytics
• 3rd party integrations
• Automated dispatch
• Fare management and smart pricing
• Multichannel booking
• Driver management

These features help you to improve efficiency, reduce wait times, and enhance your customer satisfaction.

You can also train your staff and drivers on how to use the taxi booking app. Make sure everyone is comfortable with the technology and understands how to use it effectively. This will ensure smooth operations and improve service quality.

5. Managing Operations

Managing your business operations manually is a headache. Below, you will know how the software can help you manage operations smoothly and stay on track.

Driver Management: Hire professional, reliable drivers who reflect your company’s values. Managing them manually is tough, so use taxi dispatch software to schedule, track, and monitor drivers online; saving time, reducing costs, and keeping operations smooth.

Fleet Maintenance: Regularly maintain your vehicles to avoid breakdowns and ensure safety. This includes routine checks, servicing, and repairs. Keeping your fleet in good condition is crucial for reliability and customer satisfaction.

6. Marketing and promotion

Making your business reach a wider audience or customers with the help of marketing and promotion is extremely crucial for success in today's digital era.

Here is a simple strategy that you can use to attract customers, which is essential for business growth:

Digital Marketing tools and strategies: Use social media, search engine optimization (SEO), and online advertising to reach potential customers. Create engaging content, run promotions, and maintain an active online presence to attract and retain customers.

Partnerships: Partner with local businesses, hotels, and event organizers to offer exclusive services. These partnerships can provide a steady stream of customers and enhance your business’s reputation.

7. Financial Management and Cost Optimization

Effective financial management is key to the long-term success of your UK PHO business. Monitoring expenses and revenue helps you make smarter business decisions and stay profitable.

i. Manage Operational Costs: Operational costs include vehicle maintenance, driver wages, licensing, and insurance. Reduce expenses by investing in fuel-efficient or electric vehicles, scheduling regular maintenance, and using automated dispatch software to streamline operations.

ii. Profit Margins and Pricing Strategies: Set fares strategically to maintain profitability. Use dynamic pricing during peak hours and special events, while offering competitive rates during off-peak times. Keep an eye on local competitors to balance affordability with profits.

iii. Tax Obligations and Deductions: Understand your tax responsibilities, including VAT, payroll taxes, and income tax. Consult a UK tax professional to leverage deductions such as vehicle depreciation, fuel, and maintenance costs.

By managing costs, optimizing pricing, and staying tax-compliant, your PHO business can maximize profits while maintaining high service standards.

Conclusion

Starting a PHO business in the UK requires careful planning, adherence to regulations, efficient management, reliable taxi dispatch software with advanced features, and smart marketing and promotion.

By following this guide and leveraging advanced taxi dispatch software like Yelowsoft, you can establish a successful and profitable taxi service.