Quick answer
Over five years, hosted telephony usually costs less than an on-premise PBX for UK businesses under about fifty users, once every cost is counted rather than just the visible ones. An on-premise system front-loads capital - the PBX, licences, installation, handsets - and then keeps costing: maintenance contracts, line rental or SIP channels, licence upgrades, the engineer visit when it fails, and eventual replacement. Hosted has almost no capital cost and a predictable per-user subscription that includes the features, the upgrades and the fixing. Where on-premise can still win is a larger single site with many users and modest concurrent-call needs, a business with specialist PBX features, or a PBX under five years old that simply needs SIP trunks to survive the ISDN switch-off. The mistake is comparing a PBX quote's capital figure against a hosted quote's monthly figure; put both over five years and the answer is usually clear.
I look at this from the finance side. Two of the worked examples below are drawn from the shape of real customers, with illustrative September 2026 guide figures. If you want the comparison run on your numbers, get a no-obligation quote and we will build it both ways.
Every cost line, both sides
| Cost line | On-premise PBX | Hosted telephony |
|---|---|---|
| Phone system | Capital purchase (or lease), typically thousands to tens of thousands depending on size | Included in the seat |
| Installation and configuration | One-off, often significant | Usually bundled into the term |
| Handsets | Purchased, proprietary to the PBX vendor | Standard SIP phones or the app; often reusable; rental option |
| Lines / trunks | ISDN (being withdrawn) or SIP channels, monthly | Included in the seat |
| Calls | Per minute or bundles | Usually inclusive UK minutes on business seats |
| Maintenance / support | Annual contract, typically a percentage of system value, plus call-out charges | Included |
| Feature upgrades | Paid licences (recording, mobility, more users) | Tier or bolt-on, per user |
| Software updates and security | Depends on the maintainer; often neglected | Continuous, by the provider |
| Power, space, UPS | Small but real | None on site |
| Resilience | Additional hardware if wanted; a site outage stops the phones | Platform resilience included; office outage diverts to mobiles |
| Remote working | Often an add-on licence and a VPN | Native |
| End of life | Replacement in year five to eight, repeating the capital cycle | None; the platform evolves under you |
| Seat creep | n/a | Licensing users who do not need a full seat; manage with device and basic seats |
Worked example: a 12-user professional firm
Twelve staff, one site, a receptionist, no recording requirement, modest call volume. Illustrative September 2026 guide figures, ex VAT.
| Five years | New on-premise PBX with SIP trunks | Hosted telephony |
|---|---|---|
| System and installation | Low-to-mid thousands, year one | Nil (set-up bundled on a 36-month term, then rolling) |
| Handsets | 12 proprietary handsets, year one | 4 new SIP handsets for reception and shared areas; app for the rest |
| Lines and calls | 4 SIP channels plus call bundles, monthly | Included in 12 business seats at roughly £12 to £16 each |
| Maintenance | Annual contract from year two | Included |
| Faults and changes | Call-out charges as they arise | Included; changes made in the portal |
| Resilience and remote working | Not included; VPN and licence extra if wanted | Included |
| Year-five position | PBX mid-life; replacement due within three years | Nothing owed; no asset to replace |
| Indicative five-year total | Higher, and lumpy - most of it in year one | Lower, and flat: roughly £150 to £190 a month throughout |
For a firm this size the on-premise route rarely makes sense in 2026. The capital and the maintenance contract buy less than the seats do, and none of the flexibility.
Worked example: a 40-user business with a call-heavy sales team
Forty staff across two sites, a sales team of ten who need recording, reception at each site. Illustrative September 2026 guide figures, ex VAT.
| Five years | New on-premise PBX with SIP trunks | Hosted telephony |
|---|---|---|
| System and installation | Mid-to-high thousands, year one, plus multi-site networking | Nil beyond bundled set-up |
| Handsets | 40 proprietary handsets | Reception and shared handsets; headsets for sales; app elsewhere |
| Lines and calls | 12 SIP channels plus bundles | Included: 10 recording-tier seats at the top of the range, 30 business seats |
| Recording | PBX recording module licence plus storage | Included in the 10 top-tier seats |
| Maintenance | Annual contract, two sites | Included |
| Multi-site | Networking the two PBXs, or two systems | One platform, two sites, free internal calls |
| Indicative five-year total | Closer to hosted than the 12-user case, but still lumpy and carrying replacement risk | Roughly £520 to £680 a month throughout |
At forty users the gap narrows because a PBX's capital is spread over more users and the channel-to-user ratio favours SIP. Hosted still tends to win once recording, multi-site and maintenance are included, but this is the size at which a business with a recent PBX should genuinely consider SIP trunking into it instead of replacing it.
When on-premise still makes sense
- A recent PBX you already own. The capital is spent. SIP trunks keep it alive for the remainder of its life at low cost.
- Large single sites with hundreds of users and modest concurrent calls, where per-channel pricing beats per-seat.
- Specialist requirements - a contact-centre module, an integration the PBX already does - that would be costly to replicate.
- Genuinely unfixable connectivity. Rare, but a site with no fibre and no prospect of it should not depend on VoIP for every call. Even then, SIP trunks still need the internet.
The hidden costs on both sides
On the PBX side the costs people forget are the maintenance contract (which rises), licence upgrades for features that hosted includes, the out-of-hours fault when the system is the only one in the building, and the replacement in year six that restarts the whole cycle. On the hosted side the hidden cost is seat creep: licensing forty people with full business seats when fifteen of them take a call a week. Manage it with device licences for shared phones, basic seats for occasional callers and Teams Phone where staff already have the Microsoft licences. Our pricing guide shows how much this moves the total.
Cash flow and the balance sheet
The two models differ in shape as well as total. On-premise is capital expenditure - depreciated, financed or leased - with a low run-rate that spikes at fault and replacement. Hosted is operating expenditure, flat, predictable and cancellable at the end of a term. For most small businesses the predictability is worth something in itself; for a business that would finance the PBX anyway, the monthly figures end up closer than the totals suggest. Ask your accountant which shape suits your year, but do not let the accounting decide a technology question.
The bottom line
Put both options over five years with every line included and hosted telephony usually costs less than an on-premise PBX for businesses under about fifty users, while delivering more and carrying no replacement risk. The credible exception is a recent, capable PBX kept alive with SIP trunks until it retires. Whatever you choose, the PSTN and ISDN switch-off means the lines change either way.
We will build the five-year comparison on your actual users, sites and call volumes, both ways: get a no-obligation quote or call 0333 006 9399. Our hosted telephony service page explains what the assessment covers.
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Frequently asked questions
Is hosted telephony cheaper than an on-premise PBX?
Over five years, for most UK businesses under about fifty users, yes - once the PBX's maintenance contract, licence upgrades, faults and eventual replacement are counted alongside its capital cost. Larger single sites with a modern PBX and low concurrent-call needs can find SIP trunking into that PBX cheaper.
What does an on-premise PBX cost?
As an illustrative guide, low-to-mid thousands installed for a small system, rising to tens of thousands for a multi-site system with recording and contact-centre features, plus proprietary handsets, an annual maintenance contract and SIP channels or (until the switch-off) ISDN rental.
How long does a PBX last?
Typically five to eight years before support ends or the hardware becomes unreliable, after which it is replaced and the capital cycle repeats. Hosted platforms are upgraded continuously by the provider with no replacement event.
Should I replace my PBX or move to hosted?
If the PBX is under about five years old, supports SIP and does what you need, keep it and use SIP trunks. If it is older, out of support, missing features or unreliable, move to hosted rather than buying a new PBX. Almost no small business should buy a new on-premise PBX in 2026.
What is seat creep in hosted telephony?
Paying for full business seats for users who rarely make calls. Manage it with device licences for shared handsets, basic seats for occasional callers and Teams Phone where staff already hold the Microsoft licences. It is the main way a hosted quote ends up dearer than it should be.
Is hosted telephony capex or opex?
Operating expenditure: a monthly per-user subscription with little or no capital outlay. An on-premise PBX is capital expenditure, depreciated or financed. Choose on technology and total cost first, then let the accountant advise on the shape.