A Guide to Business Models for Taxi Drivers

At the start of their careers most taxi drivers have a big decision to make: should they work for or with a firm, or…

Image of Question MarksAt the start of their careers most taxi drivers have a big decision to make: should they work for or with a firm, or go self-employed and try to make it on their own? There are plenty of reasons to try both models, and here in the UK most cabbies have their own motives for why they do what they do. If you’re a first timer however, it can be a difficult decision, so here’s our guide to the pros and cons of being self-employed or for working with a taxi firm:

The Legal Difference

The main difference between being self-employed and working with a taxi company is the way which you’re treated under the law. Of course, the nature of your work probably won’t change much day-to-day and you won’t even notice your business model most of the time, however a self-employed person is, legally, paid directly by their customers and pockets all their income after expenses.

On the other hand, if you’re employed by a business they legally take all your earnings (except for tips) and then pay you a wage or salary. Some firms also ‘employ’ self-employed staff: this model is known as franchising and is a way of using an established company’s marketing and goodwill to boost your earnings, but you’ll still largely be self-employed.

The Freedom of the Road

For self-employed drivers, one of the biggest attractions is being able to control their earnings and the potentially boost their income by working extra hours; the more fares you pick up, the better those fares are and the more you can earn on a day-to-day basis.

This also means you’re able to control your hours, pick your holidays as and when you please and, by and large, choose how you market your cab and take bookings. Being able to choose how to run your own business is something that appeals to almost every cab driver.

Security and Employment

On the other hand, there are those who prefer a little security in life, and it’s certainly more secure to work with a larger firm. For example, not only are you more likely to be guaranteed a good income as larger businesses tend to take on more customers at once, but you’ll also reap the benefits of having a full employment contract.

Sick pay, holiday pay and compassionate leave are all things that most employees take for granted, but if you’re self-employed there’s no such thing. Working with a company can help you to get started as a cabbie and still provides a safety net should something unexpected happen.

Ownership of your Vehicle

One of the biggest questions when deciding whether to go self-employed is whether you can afford to run your own vehicle. Most firms will rent you a vehicle, which may be inclusive of taxi insurance, but will retain the ownership themselves. Obviously this will put a big dent in your monthly salary, but it will mean you won’t have to fork out for your taxi up-front.

On the other hand, if you have a car which is suitable or you can afford to purchase one, this will reduce your outgoings each month. Don’t forget to factor in maintenance and fuel however, as these can still be substantial. Your cab will also need to be in pristine condition, so don’t underestimate the power of a valet!

Tax and Finance

If you’re good with figures becoming self-employed is easy enough, but you will still need to submit a self-assessment tax return every year. This isn’t too strenuous, but it does require you to keep strict records of income and expenditure. You’ll also have to pay national insurance in a slightly different way, so factor this in when looking at costs.

On the other hand, working as an employee means you’ll fall under the ‘PAYE’ regime. This means it’s your employer’s responsibility to sort out how much tax and national insurance you are required to pay and then pay it on your behalf. This means more time earning in your cab and less time sat at home with a calculator!

Whether you choose to go self-employed or work for a taxi firm is very circumstantial, and it can change throughout your career. For drivers who are just starting out, working with a company is a great way of guaranteeing an income, but you may desire more freedom as you become more experienced and comfortable attracting fares.

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