How Much Does it Cost to Become a Taxi/Private Hire Driver? A Complete Breakdown
Becoming a taxi Driver in the UK requires more than driving skills and a standard driving licence. It's a regulated profession that demands specific licensing and financial investment. And, in councils like Bath & North East Somerset, Drivers must be at least 21 years old and have held a full driving license for a minimum of three years.
Aspiring taxi Drivers often focus solely on potential earnings, without considering the costs. The reality is that taxi driving isn’t a job, but a business. And, like all businesses, it involves some startup costs, ongoing overheads, and regulations to abide by—all of which impact net profit.
Whether operating as a hackney carriage or private hire vehicle Driver, success comes down to your earnings after expenses.
Initial licensing and application costs
The initial licensing process is going to be your first investment, assuming you already have a suitable car. The cost of licenses and tests will vary depending on the council, as this is who oversees the taxi operations.
Taking Bath and North East Somerset Council as an example, a new application fee stands at £582, which includes the first DBS check (usually worth £101). Renewals are a little cheaper at £444. There are a few other costs to consider, too, including
An English Language Assessment (£74)
A Knowledge Test (£75)
A Medical Certificate under Group 2 standards
An Approved Drivers Assessment
Bath Council issues licenses valid for three years, with all licenses expiring on February 28th regardless of the issue date. So when annualised, the license application fee is under £150/year for renewals.
Vehicle-related expenses
The vehicle is everything to a taxi Driver. Without it, no fares can be taken on, yet it remains the largest financial commitment for taxi Drivers. Whilst it’s true that some people may already have a suitable car, many mistakenly believe their personal use car is suitable when it might not be.
Vehicles must meet strict council requirements and pass regular inspections. In Bath, for example, vehicles must be under four years old when first licensed. However, not just any three-year-old car will do, it must have an engine size of over 1,400 cc, as well as five doors (with the boot being classified as a door).
New Drivers face three options here: purchasing outright, financing, or leasing. A new taxi-suitable vehicle typically costs between £15,000 and £30,000, although this can be less for second-hand vehicles. Popular models include the Toyota Prius, Skoda Octavia, and Mercedes E-Class. Financing can spread this cost (but interest, which is tax deductible, will incur). Alternatively, Drivers can lease the car (they will never own the vehicle), for as little as £200 per month.
To get this vehicle licensed, an application fee can cost around £61, a roof sign around £74, while a renewal application costs more, at around £124. Unlike Driver licensing, vehicle licensing typically only lasts a year. So when annualised, Driver and vehicle licensing may add up to around £275/year.
But the car needs to be maintained of course. Some of these costs may include:
Vehicle Insurance (around £1,900 to £2,000 per year)
Annual MOT certification (around £50 per year)
Regular servicing every 10,000 miles (around £250)
Immediate repairs for any defects
Road tax (£190/year for a Skoda Octavia, £0 for some EVs)
So far, the above figure adds up to around £3,190 as a start-up cost, not including the vehicle itself.
On-going fixed costs (i.e. looking at renewal pricing and ignoring initial language/knowledge tests), the annualised costs so far are over £5,500/year, assuming two to three services per year and a Skoda lease.
Although the above costs can vary within a small range, they’re not variable costs. What this means is that they’re fixed overheads that you will pay whether you’re working part-time or full-time.
Variable costs are expenses that change in proportion to the level of business activity. For taxi Drivers, these costs increase with the number of fares taken or miles driven (i.e. fuel and commission).
Fuel
Fuel costs are a very important consideration. However, they have a large range. Fuel costs depend on miles (which depend on urban or rural areas, weekly hours, type of fares), fuel efficiency, fluctuating fuel prices, and whether the car is electric, hybrid, or ICE. It could range from £1,500 a year to over £10,000 a year.
Electricity is vastly cheaper than fuel, with estimates of fuel being 80% more expensive, although this heavily depends on whether you’re charging at home (cheap) or at a charging station (more expensive). It will also likely mean not paying road tax, with road tax being another cost to add to an ICE car.
Operator and app-based platforms
Private hire Drivers need to work with an operator or hold their own operator's license whereas hackney carriage Drivers predominantly work the ranks. However, hackney carriage Drivers can work for an operator if said operator accepts hackney carriages. Various operating platforms exist now, each with distinct fee structures. When it comes to app-based platforms, Uber is the largest ride-hailing platform, however, alternatives are becoming increasingly popular.
Commission is a useful payment structure in helping understand a taxi Driver’s costs. It’s a simple cost-per-sale. It’s not as easy to forecast the total cost, but it is a variable cost, which is particularly useful for part-time drivers or those concerned about overheads.
However, any commission rate over 20% is deemed high by Drivers. While the commission can be steep, apps are a source of gaining access to more fares.
Alternatives
Using multiple apps is possible, and is done throughout the industry.
A reliable operator can come in a few different forms. If you’re exploring the options available, take a look at our taxi operator comparison guide.
Additional and unforeseen costs
Card processing
In 2025, most customers expect taxi and private hire Drivers to accept card payments. Although some apps have in-app payments, many taxi operations still use a meter or simply allow for in-car payment. As a result, a card terminal can be another fee (though some operators will provide them for free).
Regardless of whether it’s provided or not, taxi Drivers will lose out on around 0.5% to 1.5% in card processing fees. Over the course of a year, this adds up, depending on how much the Driver earns.
Accountant and tax
Being a sole trader, a taxi Driver may use an accountant to process their self-assessment and maintain their books. £325 per year is typically what an accountant will charge for a £30,000/year sole trader. And, it may be worth it because as shown above, there are a lot of expenses to track—most of which are tax deductible.
It’s also important to forecast the year’s net profit accurately and put away a weekly or monthly amount to contribute to the upcoming tax bill.
Accidents
Driving in a car all day increases one’s chances of a car crash. Even a minor crash can set you back a few hundred pounds, and the exact amount will depend on your insurance excess. Excess has been rising in the UK, and it has a broad range. £400 wouldn’t be an atypical excess, and it’s something to bear in mind for even the most seemingly minor of accidents.
Smartphone and data
Unless a very traditional operator is being used, the modern taxi Driver relies on their smartphone to access fares. This means that a sluggish, £200 running on outdated iOS/Android software will not do, because the lags may be too much to accept rides quickly.
A sufficient smartphone may be anywhere from £300 to £1,300, depending on personal taste. However, having enough data is also crucial, particularly if the phone is being used as a music hub for passengers. This may be around £20 to £30 a month.
Cleaning
Cleaning is something that a taxi Driver can cut costs on by doing themselves. However, when running short on time or not being fit enough to clean an entire car regularly, Drivers can expect to pay £6 for an automatic car wash and £65 for a full valet car wash, while an interior valet might be £20 to £30. This would need to be done weekly if the Driver is unable or unwilling to clean their own car.
Training
Some taxi operators require additional training, or Drivers may simply find it a way to stand out when getting a job at a more specialised operator. However, some operators, like Zippe Transport, provide free training.
Final word
Being a taxi Driver comes with many different costs, and it’s important to look at net profit figures more seriously than fare earnings. £3,000+ was a rough initial figure to get up and going, while £5,500 was a very rough estimate of ongoing fixed costs, which are overheads that occur regardless of earnings. From then on, a Driver's variable costs will depend on how many fares they take on, the car they drive, and the operator(s) they are working with.
