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Setting up a Taxi Business

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Business guides » Setting up a Taxi Business

What is a Taxi Business?

Since 2005, the number of registered taxis and private hire vehicles (PHVs) in the UK has increased by nearly 90%. There are currently more than 250,000 taxis operating in England, with more than 95,000 operating in London alone. Taxis are increasingly considered to be a convenient and reliable mode of transport and with the increased safety and security measures that taxi firms across the country have implemented, many people now consider taxis to be safe and trustworthy.

We are also now living in a digital society, with technology constantly on the rise. There has been a significant increase in ride-hailing apps, such as Uber and Grab, and many local taxi companies now have mobile apps and online booking options. This has made taxis more popular with the younger generation and those who are looking for easy and convenient ways to book a taxi. Taxi apps also give passengers the opportunity to track their driver and their journey, which is not only convenient but also provides an extra element of safety.

Fewer people are hailing taxis on the street and paying in cash. Instead, more people are booking their taxis using apps and paying by card. Although taxi businesses that utilise modern technology are becoming increasingly popular, there is still a market for local businesses that have a phone service for people to call and book or that allows customers to hail them on the street. Some taxi customers (particularly the older generation) prefer to use local businesses that still allow cash payments.

A taxi is a vehicle that is licensed to transport passengers for a fare or payment. Taxis are vehicles for hire for a single passenger or a small group of passengers.

There are two main types of taxis:

  • A public hire taxi: This is a taxi which doesn’t need to be booked in advance by the passenger. This type of taxi is frequently called a hackney carriage and may look like a black cab, although they can also be standard cars. Private hire drivers are licensed to pick up passengers who have not pre-booked, e.g. those who flag them down in the street, and also frequently wait in taxi ranks in city centre locations or outside train stations, bus stations, airports and other popular locations.
  • A private hire taxi: This type of taxi must be pre-booked, either via a taxi booking office, an online website or a mobile app. The most common private hire taxis are from local taxi companies that you need to call to book or ride-hailing apps, such as Uber. Private hire taxis cannot accept passengers who have not pre-booked and, therefore, cannot wait at taxi ranks or pick up passengers who hail them.

 

When setting up your taxi business, you must decide whether you want to operate a public hire or private hire business. A taxi business operates one or more vehicles for hire. You can choose to operate your business independently or hire additional drivers.

There are many different tasks associated with running a taxi business. The day-to-day responsibilities can vary, depending on the type of taxi business you set up.

Some of the tasks you could expect include:

  • Picking up and dropping off passengers.
  • Accepting bookings and planning routes and journeys.
  • Taking the fastest and safest available routes.
  • Helping to load and unload the vehicle.
  • Calculating the correct fares (e.g. starting and stopping the taximeter at the appropriate time), accepting payments, giving change and providing receipts.
  • Regularly cleaning your vehicle.
  • Maintaining your vehicle and ensuring it is in good working condition.
  • Adhering to all road regulations.
  • Ensuring the safety of your passengers.

 

You could choose to operate a taxi business in a specific area or a specific route, for example, to and from your local airport. Alternatively, you could operate a taxi business that provides driving services to another business or establishment, for example, transporting students with disabilities to a local specialist school or working as a taxi service for a local hospital.

To become a taxi driver in the UK, there are some requirements you must fulfil, including:

  • A valid UK, NI or EU driving licence that you have held for at least 12 months.
  • You must be at least 18 or 21 years of age (depending on the area you will be operating).
  • You must undergo background checks, a skills test and a medical check.

 

Some other qualities that can be beneficial are strong driving skills and plenty of experience driving (particularly in your chosen area of operation). Good interpersonal skills, strong organisational and time management skills and a willingness to work shifts or during peak hours can be beneficial. If you enjoy driving or would like to run a business where you are in charge of other taxi drivers, running a taxi business could be a great career choice for you.

Types of Customers

There are several factors that could influence your typical customer base:

The type of taxi business you run

Whether you set up a private hire or public hire taxi business will be a significant factor in determining your typical customer base. For example, a public hire taxi may be more likely to attract passengers in city centre locations or travellers from train stations or airports.

Whether you offer online booking or a ride-hailing app

Much of the younger generation, particularly those in their 20s and 30s, primarily use taxis that they can book online or on an app. This could be for safety reasons or because they find it more convenient. The older generation often prefers using a local taxi business that they can call to book their journey or discuss their requirements. Decide on whether you plan to offer online or app booking when considering your typical customer base.

Your location

The location of your business will also be a major factor in determining your typical customer base. People tend to use a taxi company that is local to them and primarily operates in their area. This is because they are likely to get a faster pick-up time and lower prices. If you are located in a residential zone, your typical customer base is likely to be local residents. If you operate near a major landmark or establishment, such as a hospital, your customer base is likely to be made up of visitors to that establishment.

Your pricing strategy

Different taxi businesses operate different pricing structures. For example, you may charge by the meter or provide a pre-journey price. Some taxi firms also charge higher prices for peak times or popular journeys. Your pricing structure could affect your typical customer base, particularly if you have a lot of local competition or popular taxi businesses, such as Uber and Grab, already operating in your area.

The size of your vehicle

The number of passengers your vehicle can accommodate, and the size of your boot could affect your typical customer base. This is because a larger vehicle will be chosen by larger groups of people or families and vehicles with larger boots will be more beneficial for people requiring more space, such as when travelling from the airport or on the way home from a shopping trip.

Whether you offer baby or child seats

Some taxis provide a baby or child seat to allow families with young children to use their vehicle. You would need to ensure these seats are safe to use and correctly installed if you decide to offer this service. Some taxis that offer this service charge higher prices.

Whether your vehicle is specially adapted for wheelchairs

A wheelchair-friendly taxi has a ramp or passenger lift to assist the passengers with getting in and out of the vehicle. These vehicles usually accommodate both manual and powered wheelchairs. They may also have lowered floors and additional space. Because there are fewer wheelchair-accessible taxis, these taxis are often in high demand.

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Equipment You Will Need

Equipment is an essential purchase for your taxi business. Compared to other businesses, a taxi business has relatively few equipment requirements. It may also be possible to use some equipment you already own. However, it is essential that this equipment is safe, well-maintained and in good physical condition.

The amount of equipment you require can vary depending on the size of your business. If you hire other taxi drivers, you may supply them with all the equipment they require or ask them to provide it themselves.

Below is a list of equipment typically required by taxi businesses.

Cars

This is the main piece of equipment you will need to operate your business. Any car can be turned into a taxi, as long as it is new or has passed all MOTs and services, is safe and in good working condition and is well-maintained and physically presentable.

The most popular cars used for taxis in the UK are:

  • Hyundai Ioniq
  • Toyota Prius
  • Skoda Octavia
  • Mercedes C-Class
  • Ford Mondeo
  • Seat Alhambra
  • Citroen Berlingo

 

To maximise your profits, you will also want to ensure your cars are fuel-efficient and/or hybrid. This can reduce the amount of money you are spending on fuel. You may opt to supply cars to all of your drivers or allow them to use their own cars. When purchasing your vehicles, you may opt to buy new or used cars or lease your vehicles.

Adhesive door and body panels

This can help your business gain exposure and can help to identify your cars as taxis. These panels can be kept on at all times to provide constant exposure to your business. The panels should include your taxi business’s name and a contact number.

Satellite navigation system

Satellite navigation may be installed in your cars or may be an independent piece of equipment. Alternatively, you could choose to use your mobile phone’s navigation system. A navigation system is essential, as it ensures you always follow the best possible route and avoid any traffic or road incidents that could cause unnecessary delays.

A mobile phone mount

If you use your phone for navigation, you will need a mobile phone mount. This could either be a windscreen mount or a dashboard mount. This gives you hands-free access to your phone and allows you to view your maps and navigation without touching your phone. If you take taxi bookings on a mobile phone app, a phone mount will allow you to easily accept journeys.

A taxi meter

Many taxi businesses use a taxi meter to price their journeys. The meter is activated when the journey starts (or when the driver is waiting for the passengers to arrive) and ended when the journey concludes. The meter will then automatically provide a price. The driver can also choose to add a surcharge, for example if it is rush hour or after hours. However, this surcharge must be clearly displayed, and passengers should be aware of any additional costs.

Bluetooth headsets

If you accept bookings by telephone, Bluetooth headsets allow you to communicate with customers or with your booking operator. You could also use the headset to communicate with other drivers in your business, for example, to give them information about their next booking. Bluetooth headsets are completely legal in the UK, as long as using one doesn’t interfere with your driving.

Payment machines

A portable card machine allows you to take payments via debit or credit card. Many people no longer carry cash and, particularly following the Covid-19 pandemic, prefer to use their bank cards. Failing to have a card machine in your taxi could result in you losing custom. Ensure you choose a card machine that is reliable and easy to connect.

Fleet tracking software

If you have a number of drivers working for you, fleet tracking software allows you to see the location and progress of your taxis. This allows you to determine who is best located to accept the next journey, reducing customers’ wait time and your fuel costs.

A phone system

Some customers still prefer to speak to a phone operator, rather than booking a taxi through an app. Your operator should be contactable at all times during the hours your business is operating. A quality phone system can ensure your business appears professional.

Your phone system could include:

  • An automatic greeting message.
  • Call queueing.
  • Despatch integration.

 

A booking system

A booking system allows you to create journey bookings, which is particularly beneficial for customers who book their taxis in advance.

Your booking system could include features, such as:

  • Making and managing bookings.
  • Adding bookings to the calendar.
  • Storing customer details.
  • Taking payments or sending customers a quote.
  • Saving any customer requests, e.g. a larger vehicle.

 

Dashboard cameras

Dash cams document your driving and are the strongest and most efficient way of defending yourself in the event of an accident or incident on the road. Dash cams can also help to deter theft and lower your car insurance premiums, helping to protect your business and maximise your profits. Dash cams can be installed on the front and back of your vehicles.

CCTV cameras

Installing CCTV cameras in taxis is on the rise. Cameras can help to protect your drivers from abuse or harm, can prevent the occurrence of crime and can assist the police and your insurance company in the event an incident does occur. If you choose to utilise CCTV in your business, ensure you follow any guidelines. You may choose to install cameras in all of your vehicles or only some of them.

Business cards

Business cards are an important marketing tool and can be given to new or existing customers. Your business cards should include your business name, contact information and location. The cost of 500 business cards can be as little as £20.

Cleaning equipment

To protect the health and safety of you and your passengers and to uphold the high standards of your business, you will need to clean your taxis regularly. You may choose to supply each taxi with individual cleaning equipment or have one set of equipment that all of your drivers share. Some cleaning equipment you could purchase includes a hoover, sponges, cloths, window cleaner, a bucket, a wheel brush, car shampoo and cleaning spray.

Personal Protective Equipment (PPE)

PPE has become more popular with taxi drivers following the Covid-19 pandemic. PPE, such as facemasks and protective gloves, can help to protect you from germs and illness.

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Typical Costs

When you are creating a business plan for your taxi business, you will need to calculate the approximate costs associated with setting up and running this type of business. Calculating your typical costs allows you to estimate your initial investment requirements, any monthly and annual costs, your pricing strategy, your profit goals and your acceptable profit margins.

There are multiple costs associated with setting up and running a taxi business. Some of these costs will be one-off initial costs that you will need to pay when you are setting up your business. Other costs will be ongoing costs you will need to pay regularly – usually weekly, monthly, quarterly or annually.

The typical costs will vary, depending on the size of your business, whether you operate your business alone and whether you provide equipment, such as the cars, for your drivers or whether they use their own cars.

Some of the costs you can expect to be responsible for include:

Your vehicles

Your vehicles are the most essential components of your taxi business. You may choose to purchase new or used vehicles or lease your vehicles on a monthly basis. The costs can vary considerably, depending on the number of vehicles you require. You can expect to pay between £10,000 and £60,000 per car, depending on the age, make and specification.

Other equipment

Your equipment is an important purchase as it can help you to run your business more successfully. The cost of equipment can vary based on how much equipment you require. You may choose to purchase less equipment initially and expand your equipment as your business grows. Equipment for your taxi business can cost between £2,000 and £20,000.

A premises

You may choose to operate your taxi business from a commercial location. This is more common with larger taxi businesses that offer telephone bookings and require a taxi operating centre. Your commercial premises may also provide parking spaces for your taxis to be kept overnight and when not completing bookings. You will need to rent your premises on a monthly or annual basis. Rental prices can vary significantly, depending on the location and the size of the premises. City centre locations and newly built premises usually have the highest rental costs. Rental costs are often calculated per square metre. They can range significantly, from £500 to £15,000 per square metre annually. Because rental costs are expensive, commercial location is only recommended for larger taxi companies with many drivers.

Maintaining, repairing and replacing your vehicles and other equipment

Repairs, maintenance and replacements are ongoing costs you will need to factor into your budget. This includes the cost of your MOTs, services, refreshing your oil and brake fluid and replacing your tyres. You may also need to maintain, repair or replace other equipment, such as your phones and satellite navigation systems. Correctly using, cleaning and maintaining your cars and other equipment can extend their life, but potential repairs and replacements should still be factored into your budget.

Fuel costs

This is an ongoing cost you will need to factor into your budget. Although the price of fuel for the journeys should be reflected in customer pricing, rising fuel costs can still have a significant impact on your profits. When calculating your average fuel costs, consider whether your cars are petrol, diesel, hybrid or electric. On average, it costs between £80 and £110 to fill up a petrol tank (although this can vary depending on current fuel costs). A full tank of fuel typically covers between 200 and 400 miles.

Running costs

These are the day-to-day costs associated with running your business. Some running costs are paid monthly, and others are paid quarterly or annually. Your running costs could include tax, insurance, phone plans, licences and website and app fees. If you operate a commercial location, you will also have to account for utility costs, such as electricity, gas and water.

Staff

You may opt to hire staff, such as drivers and call operators. There are several ways you could opt to pay your staff:

  • Hire them as permanent employees and pay them at least the national minimum wage of £9.50 per hour. You may also be responsible for expenses such as holiday pay, sick pay and maternity/paternity pay.
  • Hire drivers on a self-employed basis and charge them a set fee to work for your business.
  • Hire drivers on a self-employed basis and take a percentage of their earnings.

 

Licences

There are multiple licences you will need to apply for to operate as a taxi driver. The types of licences you must apply for can vary depending on where in the UK you are based.

Some licence fees you can expect to be responsible for include:

  • Enhanced DBS check.
  • Taxi licence and renewal.
  • Knowledge test.
  • Knowledge of London written exam and face-to-face interview (if applicable).
  • Medical assessments.

 

Although prices can vary, you can expect to pay between £150 and £1,000 for your licences (depending on the types of licences you require).

Branding

When creating your brand, consider the type of taxi business you are setting up and how you want your brand to be perceived by potential customers. Branding could include creating your business name and logo, designing your adhesive door panels, creating your business’s visual identity and your business website and app. You could hire a professional to help you with branding or do some or all of the work yourself. Branding can cost between £500 and £10,000, depending on the level of work required.

Advertising and marketing

To ensure your taxi business attracts customers and creates maximum profits, you will need to spend money on advertising and marketing. It is recommended that you spend between 1%-3% of your annual turnover on marketing. For example, if your annual turnover (or your desired annual turnover) is £80,000, you should spend between £800 and £2,400 on advertising and marketing. You may need to invest more money when you initially set up your business or when you are trying to grow your business. To reduce your costs, capitalise on free marketing strategies, such as on social media or in your local community.

Business insurance

There are multiple coverage options available for taxi drivers. Some types of coverage will be mandatory, and others are optional. Your coverage options include:

  • Private Hire Taxi Insurance (for private hire taxis).
  • Public Hire Taxi Insurance (for taxis that pick up non-pre-booked passengers).
  • Public Liability Insurance.
  • Employer’s Liability Insurance (if relevant).
  • Unlimited Mileage Cover.
  • Breakdown Cover.
  • Legal Cover.

 

Insurance costs can vary, depending on your insurance provider, the level of coverage you require and your driving history. Prices typically start from £40 per month for one vehicle. You may receive a discount if you are insuring multiple vehicles.

Typical Pricing for Customers

The cost of hiring a taxi can vary depending on multiple factors, including:

  • The area the taxi is operating in: Bigger cities, such as London and Edinburgh typically charge higher prices.
  • Your location or destination: You may charge a surcharge if you are at a location such as an airport.
  • The time of day: Taxis typically charge a surcharge at peak times and at night.
  • The demand: The higher the demand, the higher the cost will be.
  • Local competition: The more taxi businesses that are operating in the area, the lower the price may be.

 

There are multiple ways taxi companies determine their pricing. The most common ways are:

  • An initial charge, followed by a set charge for every mile (e.g. £3 per mile).
  • An initial charge, followed by a time-determined meter charge (e.g. the meter goes up for every minute you are in the taxi).
  • A set fee for the journey that is pre-agreed by the driver and passenger.

Safely Running a Taxi Business

Safe practices in your taxi business can help to protect the health, safety and well-being of you, your drivers, your passengers and other road users.

Some ways you can safely run your taxi business include:

Ensure you have the relevant knowledge and experience to drive a taxi

Driving a taxi is very different to driving a personal car. Because you are responsible for the safety of yourself, your passengers, other drivers and pedestrians, you must ensure that you have extremely strong knowledge of road safety laws. Knowledge and awareness of the roads in your area of operation and knowledge of local landmarks, as well as popular routes, are also recommended.

Protect you and your drivers from abuse or violence

Taxi drivers are in a vulnerable position as they are in a confined space with others and are often facing away from their passengers. Consider ways you can protect yourself and your drivers from abuse or assault, for example:

  • Install CCTV in your vehicles.
  • Have an emergency plan in place.
  • Refuse a passenger if you have any doubts about your safety.
  • Carry a minimal amount of cash with you at one time and keep any cash hidden in a secure box.
  • Make sure your location can also be tracked, for example, via the radio, a lone worker device or a tracking app.
  • Install screens to protect yourself from passengers sitting in the back of your car.
  • Record any incidents of abuse, assault or crime and report these to the police.
  • Don’t fight back if you are threatened.
  • Do not volunteer any personal information to your passengers.

 

Be aware of potential child exploitation (CE) and report any concerns to the police

Taxi drivers play a pivotal role in identifying the sexual and criminal exploitation of children as these children are often transported in taxis. Look for any unusual or concerning behaviour or signs that exploitation may be taking place, make notes about your concerns (including descriptions of those involved, locations and names) and report it to the police as quickly as you can.

Manage safety on the road

You are responsible for managing road safety hazards. You must ensure safe driving at all times, for example:

  • Always adhere to speed limits.
  • Anticipate any hazards and be prepared for how to deal with them.
  • Don’t use your mobile phone while driving.
  • Don’t drive distracted.
  • Take the appropriate number of breaks.
  • Approach zebra crossings correctly.
  • Respect cyclists.
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Conduct risk assessments

Although not a legal requirement for businesses with fewer than five employees, risk assessments can help to eliminate risks and ensure safe practices in your business.

As part of your risk assessments, you should:

  • Identify hazards.
  • Determine who could be at risk.
  • Evaluate any potential risks.
  • Implement relevant safety measures.
  • Record the results of the risk assessment.
  • Review the risk assessment regularly.

 

You should keep physical records of your risk assessments as evidence of your commitment to safe practices.

Ensure your vehicle is well-maintained and safe to drive

An unsafe vehicle can be a danger on the road. You should perform regular checks on your vehicle, including checking the tyre pressures, oil level and brakes. You should also ensure your car undergoes regular services and MOTs. If you have any concerns about your vehicle, do not accept any passengers.

Properly maintain and set up equipment

Any equipment you use must be properly maintained, correctly set up and safe to use. You must protect yourself, your staff and your customers from accidents or injuries caused by equipment. You should also perform regular equipment inspections to ensure your equipment’s safety and help extend the lifespan of your equipment. Maintenance includes regularly checking for faults, regular cleaning and ensuring it is functioning correctly.

Implement cleaning policies and procedures

Strict cleaning procedures must be in place in your vehicles. This includes cleaning, disinfecting and sanitising all surfaces. You should clean regularly throughout the day and conduct a deep clean if your vehicle becomes spoiled, for example, if a passenger vomits inside your vehicle.

Implement emergency procedures

Having emergency procedures is important to ensure the safety of everyone involved. Being aware of what to do in the event of an accident or an emergency is a great way to protect your passengers and other road users.

Legal Requirements

Complying with legal requirements is essential when setting up and running a taxi business.

The legal guidelines you must comply with depend on several factors, such as:

  • Whether you operate a public hire or private hire taxi business.
  • How you make your bookings.
  • Whether you hire employees.
  • Whether you have a commercial location.

 

Some of the legal requirements you need to be aware of include:

Ensure you comply with eligibility requirements

There are several eligibility requirements you will need to comply with before operating as a taxi driver.

These can include:

  • You must be legally eligible to live and work in the UK.
  • You must hold a full GB, NI or EU driving licence and have had the licence for a minimum of 12 months (or three years in London). Your licence must be registered to your current address.
  • You must be a ‘fit and proper person’.
  • You may have to undergo medical examinations, e.g. an eyesight test.
  • You may have to undergo a knowledge test.
  • You may have to take an additional driving test.

 

Contact your local council to determine the exact eligibility requirements you must comply with.

Apply for a licence to drive a taxi

You must apply for a specific licence to drive a taxi in the UK. Guidance changes depending on where in the UK you are located:

  • Outside London: You must apply to your local council for a licence to drive a taxi or private hire vehicle (PHV).
  • Inside London: You must apply to Transport for London (TfL) to drive a taxi or private hire vehicle (PHV).
  • Northern Ireland: Apply for a taxi operator licence from the Driver and Vehicle Agency (DVA) NI.

 

It can take up to 16 weeks for your licence to be approved so ensure you apply for your licence before you begin operating as a taxi driver. If you hire other divers, you must ensure they are fully licensed before they begin working for your business. You will have to renew your licence every 12 months or every three years.

Obtain a criminal record check

To demonstrate that you are a ‘fit and proper person’, your local council will require a criminal record check. Without a DBS check, you will not be eligible for a taxi driver’s licence.

The type of check you require depends on the country you live in:

  • England: Disclosure and Barring Service (DBS).
  • Wales: Disclosure and Barring Service (DBS).
  • Scotland: Protecting Vulnerable Groups (PVG) Scheme.
  • Northern Ireland: AccessNI.

 

Comply with the Information Commissioner’s (ICO) guidance on CCTV

The ICO guidelines state that in the majority of circumstances, continuously recording CCTV in a taxi is unlawful. However, it is acceptable to record whilst you are on a job, i.e. whilst you are completing a journey with passengers in your taxi. You should make it clear that CCTV cameras are in use in your taxi, for example, by displaying signs.

Ask your GP to complete a group 2 medical form

When you apply for your taxi driving licence, you must declare any health conditions that could affect your suitability or safety when driving. A group 2 medical form can be requested from the DVLA and should be completed by your doctor. This form is valid for five years if you are under 65 and one year if you are over 65. If you develop any health conditions that could affect your driving within this time frame, you must notify the DVLA immediately.

Only collect non-pre-booked passengers if you are licensed to do so

Not all taxi drivers are licensed to collect passengers that haven’t pre-booked, for example, those who hail a taxi down on the street or wait at a taxi rank. Ensure you check what your licence allows you to do before collecting any passengers.

Comply with guidance on declining a fare

There are three main reasons why a taxi driver can decline a fare:

  • Your light is off, which indicates you are not accepting passengers.
  • The fare would be outside your terms of licence, for example, it is out of the area you are allowed to work or you are not licensed to collect certain passengers.
  • You believe the fare would put you at risk in some way.

 

Comply with the Equality Act (2010)

The Equality Act states that taxis must be accessible to people with disabilities. For example:

  • Wheelchair users must be carried at the same cost as non-wheelchair users.
  • You must give mobility assistance to wheelchair users, as is reasonably required.
  • If a wheelchair passenger chooses to sit in the passenger seat, the driver must also carry the wheelchair.
  • You cannot refuse to transport an accredited service dog and no additional cost can be charged for transporting a service dog.

 

You can apply for an exemption certificate from these duties on medical grounds or if a physical condition makes it unreasonably difficult for you to comply with these duties.

Provide receipts on request

Receipts must always be made available to passengers if they request one. Receipts should include:

  • The driver’s name and ID.
  • The taxi company’s name and number.
  • The date and time.
  • The destination or the distance.
  • The price per mile and total fare charged.

 

Comply with regulations when carrying children

The laws on children travelling in cars are different in taxis, compared to private cars.

  • If a child (aged above three years old) does not have a child seat, they must travel in the rear of the vehicle and wear an adult seatbelt.
  • Children below three years old must sit in their own seat next to an adult, not on an adult’s lap.

 

Comply with regulations regarding luggage

As a taxi driver, you must carry a reasonable amount of luggage (i.e. luggage that fits safely within the vehicle) and should assist with loading and unloading the luggage, where possible.

Comply with the General Data Protection Regulations (GDPR) and the Data Protection Act (DPA)

You must comply with both pieces of legislation when storing or sharing personal information, such as your customers’ personal information, contact details and banking information. You must also apply for a Notification to Process Personal Data Licence. If you process or store personal information such as personal details and banking information, you will need to apply for a licence with the Information Commissioner’s Office and renew your registration every year.

Comply with the Provision and Use of Work Equipment Regulations (PUWER) 1998

These regulations apply to you and any employees you hire. You must ensure any equipment, including your cars, is fit for purpose and is maintained and inspected regularly. You must also ensure that health and safety risks are minimised to an acceptable level, that you have the correct knowledge and training to use the equipment, and that protective measures are put into place. You must also ensure the equipment is used under appropriate conditions.

Comply with employment legislation

If you employ any staff on a permanent basis, you must ensure you follow employment legislation, including the Employment Rights Act (1996) and the National Minimum Wage Act (1998). You must also comply with legislation relating to recruitment, working hours, sickness, discrimination, dismissals, and maternity or paternity pay.

Comply with the Manual Handling Operations Regulations (1992)

Manual handling regulations can help to protect you and your employees from sustaining an injury or illness as a result of manual handling tasks. The regulations apply to the lifting or moving of any objects (such as luggage) and repetitive movements, such as when driving.

Comply with the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR) 2013

RIDDOR states that you must report all injuries, diseases and dangerous events that occur in your business. Reports must be made to the Health and Safety Executive (HSE) using an appropriate recording document. These regulations apply to any incidents that involve you, your staff or your customers.

Appoint a competent person and prepare a health and safety policy

The law states that every business in the UK must have a specific policy for managing health and safety. Your policy should state exactly how you will manage health and safety in your business and state who is responsible for specific tasks and how and when these tasks are completed. Follow the recommended tips from the Health and Safety Executive on how to write a health and safety policy.

Comply with the Health and Safety at Work etc Act (1974)

The Health and Safety at Work etc Act lays out the duties of all employers in the UK regarding ensuring the health, safety and welfare of everyone in your business. As you are the business owner, you will be responsible for protecting the health and safety of your employees and any clients or visitors to your business.

Register your business

You must register your business with HMRC before you begin operating. You can register as a sole trader or as a limited company. You will need to register your business name and any other relevant information.

Register for self-assessment tax

This allows you to calculate and pay your own taxes each year. You will need to track your finances every month and submit any expenses as part of your tax assessment.

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Positives of Owning a Taxi Business

Starting up a taxi business can be rewarding in many ways.

Some of the main benefits of this type of business are:

Flexible working hours

Taxis are in demand at all hours of the day and night. You can choose your own working hours and operate your taxi at the times that suit you. You can work around your family life and personal life or only work at peak times when fares are likely to be higher and you’re likely to get more business. You can also work as much or as little as you want, with some taxi drivers only working part-time.

Low entry barrier

It is relatively easy to become a taxi driver and set up a taxi business. You won’t need any formal qualifications, with the minimum requirement being a UK driving licence. Compared to other careers that can take years to train in, it only takes a few short weeks to begin working as a taxi driver and setting up a taxi business.

Engage with people

Working as a taxi driver can be extremely interesting work. You will meet people from all walks of life and have the opportunity to speak to them. Many people chat with their taxi drivers, and you may even find yourself picking up the same customers multiple times. Driving a taxi can be extremely interesting and very enjoyable for people who are outgoing and enjoy talking to others.

Option to work for yourself or work with a taxi company

You will have the flexibility of exactly how you want to run your business. You can choose to operate as a completely independent taxi and work exactly when you want to. You could also opt to work on a freelance basis for a taxi company or set up a business and hire other drivers. Alternatively, you could choose to work for a well-known taxi firm in your area or a large company such as Uber or Grab. You can make this decision based on what is best for you and your business.

It can be profitable

Working as a taxi driver can be extremely profitable. If you set up a taxi business whereby you hire other taxi drivers, this could result in high profits, as you will likely take a significant cut of their earnings or charge them a set fee. Owning a taxi business has high-income potential.

Driving for a living

Many people working in this industry love driving. If you find driving relaxing or enjoyable, this could be a great career option for you. You can listen to your favourite music, chat with your passengers and drive all around your city and the countryside. Enjoying what you do can make it feel less like work.

Opportunity for growth

There is high opportunity for growth in this industry. You could start small, by working as a self-employed taxi driver, and then grow your business by setting up your own firm and hiring several taxi drivers to work for you. You could then expand your taxi business to other areas, increasing your profits even further.

Customer loyalty and recommendations

If you operate in the same area or consistently do the same journey (e.g. airport transfers) you will likely see repeat business from the same customers. They may book your service in advance or book you for regular, repeat journeys, such as driving them to work each day or the hospital twice a week, which provides you with guaranteed and predictable income. Loyal customers are also likely to recommend your taxi business to other people, which can help you to grow your business and increase your profits.

Constant demand

There is a constant demand for taxis and the potential for new taxi businesses to succeed. Because your services will always be in demand, there is less risk of your business failing and more chance of you achieving your desired income. Constant demand makes it easier for you to get your business off the ground and for you to maintain and grow your business.

Be your own boss

You can make all key decisions yourself and steer your business in whichever direction you choose. You can choose how involved you want to be, the type of taxi business you want to set up, the areas and routes you work and whether you hire other drivers. You can make the best decisions for you and your business.

Low start-up costs

Starting your own taxi business is a relatively low-investment venture. You will have very few equipment requirements, and if you already own a reliable car that is in good condition, you can use this to operate your business. Depending on the type of taxi business you set up, you may also not have any premises costs. Low initial investment requirements will mean you won’t require any outside investment and can begin turning a profit earlier.

Work in your local community

You will likely operate your business in your local area or close to your home. Not only is this convenient for you, but it also allows you to make personal and professional connections in your area.

Pick and choose your customers

If you receive a request for a taxi and you have had a previous negative experience with that customer, you can decline to drive them in the future. You can also decline to work in certain areas, for example, if you feel unsafe or don’t want to travel to that area for another reason. As the business owner, you have complete control of your clientele.

Taxi Waiting

Negatives of Owning a Taxi Business

Although running a taxi business can be rewarding in many ways, there are some potential negatives you should be aware of.

These can include:

The registration process can be difficult

Some people think it is quick and easy to become a taxi driver. In reality, it takes between 12 and 16 weeks on average to register with your local authority. You will also need to undergo background checks, a skills test and a medical test.

Odd working hours

Although you can choose your own working hours, taxis are most in demand at night time, in the early hours of the morning when people are on their way home from a night out and at the weekend. To maximise your profits, you will need to work at peak times, which could have a negative impact on your family life and personal life.

Customer abuse

Working as a taxi driver can put you in a vulnerable position. You will be alone in your car with your passengers and this could result in potentially dangerous situations, particularly if you work at night time and are regularly driving customers who are drunk. You may be a victim of abuse or violence, and this can be harmful to your mental and physical health.

Potential for non-payments

There is always a risk of your customers not paying, i.e. if they jump out of your taxi and run away without paying. This can have a detrimental effect on your income, particularly if this happens frequently or occurs following a long or high-priced journey.

Vehicle maintenance

Maintaining your vehicle can be expensive but is an essential part of your business. Your vehicle will need to run safely and smoothly, be fully maintained and undergo regular MOTs and services. You will also need to make sure your vehicle is cleaned regularly, and that you maintain hygiene standards. Maintaining your vehicle can be costly and time-consuming.

Unfulfilled or fake bookings

This can be a regular issue for taxi drivers and can result in a loss of earnings. This can occur if a customer makes a booking and then doesn’t turn up, or if someone makes a fake booking that they never intended to complete. This can affect your income as it prevents you from accepting journeys from true customers and driving to the destination and waiting for a customer that never shows can also be a waste of fuel and time.

Impacts on your health

Many people think driving a taxi is easy, as you are sitting down for much of the day. However, there are some health concerns related to driving for much of the day, such as:

  • Back pain and strain.
  • Reduced cardiovascular fitness
  • Muscle strain and joint stiffness.
  • Eye strain.
  • A rise in blood sugar.
  • A rise in cholesterol.
  • A rise in blood pressure.

 

Business can be inconsistent

There will be certain days of the week and times of the year when there is less demand for your services and business is slow. It can be difficult to plan your finances, predict your profits and decide your working hours when your business is inconsistent. There could be times when your service is less busy, and this can have a significant impact on your profits.

Motivation of employees

If you hire other taxi drivers or call operators to work for your business, they may be less motivated than you to ensure your business is always represented highly. You could hire a staff member who is unmotivated, disinterested or doesn’t operate to your standards. This can result in bad reviews or the loss of custom which can have a detrimental effect on your business.

It can be stressful

Being responsible for the success of your taxi business can be stressful. Gaining clients, growing your business, ensuring health and safety, making a profit and being responsible for the day-to-day running of your business and all business and administrative tasks can be stress-inducing. Running your own business can be particularly stressful in your business’s first year of operation.

High liability

As a taxi driver, you are responsible for the safety of everyone in your vehicle. More than 120,000 road traffic accidents occur in the UK every year and you could be held responsible if an accident occurs while passengers are in your vehicle. Some of your passengers may not wear their seatbelts, something you may not always be aware of, and this could result in more serious injuries.

It can be competitive

You will be competing with other taxi businesses in your area and with popular taxi apps, such as Uber and Grab. Having lots of competition, particularly already established, well-known competitors, can make it more difficult for your business to grow and succeed.

No benefits

As you are self-employed, you won’t receive benefits such as pension contributions. You will also be responsible for doing your own taxes and organising your National Insurance contributions. You will also have a lack of job security.

Your business could fail

Starting up your own business can be risky. Many new businesses fail which could result in you losing money or getting into debt. Your business could fail for several reasons, such as high local competition, an ineffective business plan or if the UK encounters another recession or a period of financial difficulty.

Planning Your Taxi Business

An effective and well-designed business plan is essential to the success of your taxi business. A business plan can help you to focus on the specific steps that will help your business succeed, plan your short-term and long-term goals, determine your financial needs and help your business to grow.

When creating your business plan, ensure it contains information such as:

  • Your company information.
  • Your company description.
  • The services you will provide.
  • Your branding, marketing and advertising plan.
  • The structure of your business.
  • The operational plan for your business.
  • The financial plan for your business.

 

Some of the factors you will need to consider when creating your business plan are:

Your business summary

Your business plan should include a detailed overview of your business, including your location, the size of your business, the type of taxi business you set up, your licensing, your equipment requirements and your business goals.

Whether you will operate private hire or public hire taxis

You must choose whether to operate as a public hire or a private hire taxi business. You cannot operate as both public and private hire, as they both have different licensing requirements and require different types of insurance. Consider your local competition, which one is likely to be the most profitable and the way you would like to operate your business when making a decision.

How you want to accept bookings

If you set up a private hire taxi business, this is an important consideration. You must decide whether you want to offer telephone bookings or online/mobile app bookings. This will be a major factor in determining the types of customers your business is likely to attract.

Whether you are going to hire drivers and your strategy for pay

This is a key consideration when setting up your business. Hiring other drivers allows you to collect more passengers and operate more hours; however, it can also increase your running costs. You may choose to operate your taxi business by yourself initially and then hire other drivers as your business and profits grow. If you do choose to hire other drivers, consider whether you plan to hire them on a permanent or self-employed basis and how you plan to pay your drivers.

Your hours of operation

Your operation hours will depend on whether you are the sole driver in your business or whether your hire other drivers. If you are the sole driver, you may choose to operate set hours every day, so that your customers know when you are available and so you can maximise your profits. If you are a public hire taxi driver, you may opt to work flexible hours. If you hire other drivers, consider whether you want to operate a 24-hour taxi business or only operate set hours. You can also decide whether you want to allow your drivers to choose their own hours.

Your local competition

Being aware of other taxi companies operating in your area can help you decide what type of business to run. It can also help you determine the local demand and make sure that there is a need for your services. When analysing your local competition, look at what they do well and features of their business that could be benefiting them (e.g. they get a lot of bookings on their app). You could also look at what they could improve and implement these strategies in your own business.

Your equipment requirements

Consult the list above to determine your equipment requirements. The equipment you require will depend on the type of taxi business you set up and how big your business is. Once you have determined your equipment requirements, you can then calculate the initial costs of purchasing the equipment and your likely equipment maintenance costs (e.g. MOTs, car tax and services).

Your start-up costs and running costs

Consult the list above to help you calculate the approximate costs of setting up and running your business. Determine what equipment you need and the amount of equipment required to help you determine your start-up costs and what your initial investment requirements will be. You can then calculate whether you can finance your business yourself or whether you need to source outside investment. Determining your start-up costs and running costs can also help you to create a budget and predict when you will begin to turn a profit.

Financing your business

Consult the list of start-up costs and running costs above to determine what capital you will require. Can you finance the business yourself or will you need to source outside investment? You will also need to calculate when you are likely to begin turning a profit. If you require outside investment, you could consider a bank or other financial institution, a business loan or an investment partner.

Your pricing strategy

Consider how you plan to price your journeys, e.g. will you price by distance or by time? Will you offer set prices for specific journeys (e.g. to an airport)? Consider which pricing strategy is likely to be the most profitable and ensure you consider your drivers’ time and the cost of fuel. Your pricing strategy can impact how popular your business is and the types of customers you are likely to attract.

Your sales forecast

Your sales forecast will depend on your working hours and how many drivers you have. Consider how many journeys you can realistically do each day and whether you will be working during peak hours. Your sales forecast may change as your business grows.

Your brand

Creating your brand is a key way to ensure you stand out from your local competition. Branding can help you to focus on your target customers, attract clients and concentrate your marketing and advertising strategies. Some ways you can create your brand are by focusing on your business’s visual identity and creating a brand story.

Your advertising and marketing strategies

Your marketing and advertising plan should detail what your brand is and how you plan to promote your business. As part of your marketing strategy, consider the most effective way to reach your target audience and attract potential customers. Create an advertising plan that is specific to the type of business you are going to run and how you plan to operate. There are many ways you could choose to advertise your business, including posters and signs, leaflets and business cards, using your adhesive door panels, using paid online, TV and radio ads, and by partnering with other businesses.

Your business objectives

Your business objectives are crucial for creating a successful business plan. Your business objectives highlight the targets and goals of your taxi business and help you to create a one-year, three-year and five-year business plan to help you grow your business.

Your business objectives should be SMART:

  • S = Specific
  • M = Measurable
  • A = Achievable
  • R = Realistic
  • T = Time-bound

 

Have you complied with all legal requirements?

Consult the list of legal requirements above to check you have complied with all requirements and regulations and that all your paperwork is accurate. Failure to comply with legal requirements could have a detrimental effect on your business or could result in a fine, the forced closure of your business or, in serious cases, prosecution.

Download our business plan

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