A PBX (Private Branch Exchange) is the system that manages phone calls within your business – routing incoming calls to the right extension, enabling internal calls between staff, and connecting your office to the outside phone network. In 2026, most PBX systems are cloud-hosted rather than physical hardware.
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With the PSTN switch-off retiring analogue and ISDN phone lines by January 2027, traditional on-premise PBX hardware connected to BT lines is reaching end-of-life. This guide explains what a PBX system is, the three types available, how much they cost, and which option makes sense for UK businesses today.
What Is a PBX Phone System?
A PBX (Private Branch Exchange) is a private telephone network used within a business that lets employees share external phone lines and call each other using internal extension numbers.
Without a PBX, every person in your office would need their own dedicated phone line from BT – expensive and unmanageable. A PBX connects to a smaller number of external lines and shares them across all your extensions. When an external call comes in, the PBX routes it to the right person. When staff call each other internally, the call never touches the public network at all.
Modern PBX systems also handle auto-attendant menus (“Press 1 for Sales”), voicemail, call recording, call queuing, and conference calling. The term PBX is now used broadly to describe any business phone system – whether it is a box in your server room or a cloud service you access through an app.
Types of PBX System
The three types of PBX are traditional analogue (being retired), IP-PBX (on-premise but internet-connected), and cloud/hosted PBX (fully managed by a provider). Cloud PBX is the standard for new installations in 2026.
| PBX Type | How It Works | Upfront Cost | Monthly Cost | Status in 2026 |
|---|---|---|---|---|
| Traditional (analogue) | Hardware in your office connected to BT phone lines | £2,000-£10,000+ | £50-£200 maintenance + line rental | End-of-life – stops working Jan 2027 |
| IP-PBX (on-premise) | Hardware in your office connected to broadband via SIP trunks | £1,500-£8,000 | £4-£13/trunk + maintenance | Still viable – runs over broadband |
| Cloud/Hosted PBX | No hardware – provider hosts everything in their data centre | £0-£150 (IP phones optional) | £7-£25 per user | Standard for new installations |
Traditional PBX connects to the public phone network via analogue or ISDN lines. These systems will stop working when Openreach shuts down the PSTN in January 2027. If you have a traditional PBX, you need to migrate.
IP-PBX is on-premise hardware that connects via broadband using SIP trunks instead of phone lines. These systems survive the PSTN switch-off because they already use internet connectivity. Examples include 3CX, Asterisk, and FreePBX running on local servers.
Cloud PBX (also called hosted PBX or virtual PBX) eliminates on-premise hardware entirely. The provider runs the PBX software in their data centres and you access it through desk phones, mobile apps, or laptop software. This is what RingCentral, bOnline, Dialpad, and other modern providers offer.
Cloud PBX vs On-Premise PBX
Cloud PBX costs 50-70% less than on-premise systems, deploys in hours instead of weeks, and includes features that on-premise PBX charges extra for. On-premise retains advantages in latency-sensitive environments.
| Factor | Cloud PBX | On-Premise IP-PBX |
|---|---|---|
| Hardware | None required | Server + network equipment in your office |
| Setup time | Hours to days | Weeks to months |
| IT knowledge needed | Minimal – web-based admin | Significant – requires SIP, networking, and server skills |
| Scalability | Add/remove users instantly online | Limited by hardware capacity and licences |
| Remote working | Built-in – works from any internet connection | Requires VPN or external SIP configuration |
| Uptime | 99.999% SLA (provider-managed redundancy) | Depends on your hardware, power, and internet |
| Updates | Automatic, continuous | Manual – your responsibility |
| Control | Provider manages infrastructure | Full control over configuration and data |
Cloud PBX is the right choice for 90%+ of UK SMEs. On-premise IP-PBX makes sense for businesses with specific requirements: ultra-low latency needs (trading floors), data sovereignty mandates (certain government contracts), or very large deployments (500+ extensions) where the per-user economics of cloud become less favourable over time.
How Much Does a PBX System Cost?
A cloud PBX costs £7-£25 per user per month. An on-premise IP-PBX costs £1,500-£8,000 upfront for the hardware plus £4-£13 per SIP trunk and ongoing maintenance.
| Business Size | Cloud PBX (monthly) | On-Premise IP-PBX (total cost, year 1) |
|---|---|---|
| 5 users | £35-£125/month | £2,500-£5,000 setup + £100-£300/month |
| 20 users | £140-£500/month | £4,000-£8,000 setup + £200-£500/month |
| 50 users | £350-£1,250/month | £8,000-£15,000 setup + £400-£1,000/month |
Cloud PBX wins on total cost of ownership for most business sizes over a 3-5 year period. The breakeven point where on-premise becomes cheaper is typically around 100-200 users over a 5+ year horizon – and only if you factor in zero engineer callout costs, which is unrealistic.
All cloud providers include unlimited UK calls, auto-attendant, voicemail, call recording, and mobile apps in their monthly price. With on-premise, many of these features require separate licence purchases.
Best Cloud PBX Providers for UK Businesses
RingCentral, bOnline, Dialpad, GoTo Connect, and Vonage are the leading cloud PBX providers for UK small and mid-sized businesses, with plans starting from £7 per user per month.
| Provider | From (per user/month) | Best For |
|---|---|---|
| RingCentral | £12.99 | Growing businesses needing 300+ integrations and video |
| bOnline | £7 | Micro-businesses wanting the simplest, cheapest setup |
| Dialpad | £12 | Teams wanting AI transcription and call intelligence |
| GoTo Connect | Quote-based | International businesses needing free calls to 50+ countries |
| Vonage | £10 | Sales teams needing supervisor tools and CRM integration |
Compare all options in our full guide to business phone systems, or read individual reviews: Google Voice, NBC Cloud Voice. For businesses that want to keep on-premise PBX hardware, see our SIP trunk providers guide. For a broader explanation of how phone routing works, see our guide to telephone exchange systems and business switchboards.
