What is VoIP phone? Meaning and how it works

They’re more cost-effective, flexible, and scalable, and they’re full of features that can help your business look and sound more professional. 

That aside, by January 2027, you may have no choice but to upgrade to VoIP, as many of the UK’s communications providers are due to complete the transition from analogue phone lines to digital.

In this article, we explain what VoIP is, how it works, the benefits and features, and how to choose the right VoIP provider.

What does VoIP mean?

VoIP is a modern alternative to a traditional landline, allowing you to make phone calls over a broadband internet connection rather than a phone socket. It’s as simple as that, but it opens up a whole world of communications not enabled by analogue systems.

What is VoIP?

Instead of relying on physical wires, VoIP systems convert your voice into digital data and send it over the internet. That data is then reassembled on the other end so the person you’re calling hears your voice, just like a standard phone call, only cheaper.

Many VoIP services also support video calls, text messaging, and team collaboration tools, making them far more than just a phone replacement.

How does it differ from traditional phone systems?

Traditional landlines (PSTN systems) are tied to fixed locations and depend on copper wire infrastructure.

In contrast, VoIP offers:

• Greater mobility – take business calls anywhere via your laptop or mobile
• Lower call charges – especially for long-distance and international calls
• More features – like voicemail-to-email, auto-attendants, and integrations with your CRM
• Less hardware – no phone lines or PBX systems required

How do VoIP phones work?

As VoIP phones use your internet connection to transmit calls (whether that’s ADSL, cable or fibre), they don’t need to rely on telephone companies. Here’s how it works in simple terms:

• You connect your VoIP phone to your internet 
• You dial a phone number, and your VoIP phone instructs your provider to connect to the other party
• You speak into the phone or device
• Your voice is converted into digital data packets
• These packets are sent across the internet to the person you’re calling
• Their device receives the data, converts the digital signals into sound, and plays your voice in real time

The role of the internet

A reliable broadband connection is essential for VoIP.

The better your internet, the clearer your calls. For small businesses, even a basic fibre connection is typically fast enough – but if you have multiple staff making calls at once, you might need a higher bandwidth.

Key features of VoIP

VoIP phone systems come loaded with tools that haven’t previously been as accessible for smaller companies using traditional landlines. Here’s a breakdown of some key features and how they can help your business:

• Call forwarding – route calls from your office line to your mobile or a colleague. That means you and your teammates can still be contacted, even when on the go
• Auto attendant (virtual receptionist) – a professional greeting and call menu system (e.g. “Press 1 for sales…”) that helps direct callers to the right person, even if you’re a one-person operation
• Call recording – record calls for training, compliance, or quality control.

  Useful for service-based businesses or anyone handling sensitive customer interactions

• Call analytics and reports – see call volumes, missed calls, wait times and more. Great for identifying busy periods and improving customer service.
• Conference calling and video meetings – host virtual meetings with staff or clients from anywhere 
• Team messaging and file sharing – some VoIP platforms also act as collaboration tools, allowing for internal messaging and sharing documents. Great for communicating as a remote team
• CRM integration – allows you or your sales staff to call directly from within your CRM, which speeds up outbound calls and improves sales efficiency

The above is just a handful of the most common features available via your VoIP phone. 

Different types of VoIP

You can access VoIP services via a few different methods, including:

• Virtual landlines – app-based phone lines ideal for remote workers or sole traders
• Desktop VoIP phones – traditional-style handsets that connect via the internet
• Softphones – software on your PC or phone that acts like a telephone
• Adapters for analogue phones – convert your old desk phones into VoIP devices
• Hosted VoIP systems (Cloud PBX) – fully cloud-based systems managed by your provider
• SIP trunking – connects your existing phone system to the internet (useful if you already have PBX hardware)

Benefits of using VoIP phones

Here’s a more detailed look at the benefits of choosing a VoIP phone for your small business:

• Lower call costs – local and national calls are often free, and international calls are far cheaper than landlines. VoIP plans can start from as low as £4.50 per user per month
• Easy scalability and flexibility – you don’t need an engineer, technician or new phone lines to scale your system and add or remove users as your business grows
• Remote accessibility – your team can take calls on their mobiles, laptops or tablets, which is ideal for hybrid working or remote roles
• Advanced features – even on their basic plans, most VoIP providers offer features that help small businesses improve their operations and communications, like call routing, voicemail-to-email, and video meetings
• Simplified infrastructure – all you need to make calls is an internet connection, so there’s no need to buy, house, and maintain expensive equipment
• Integrations – connect VoIP with your CRM (e.g., Salesforce, HubSpot) or helpdesk software to streamline workflows
• Global reach – use international numbers to appear local to overseas customers, or keep in touch with global teams without worrying about astronomical phone bills

Are there any disadvantages to VoIP?

VoIP beats traditional landlines on almost every measure, but there are some limitations that you might have to make allowances for. 

• Relies solely on the internet – no connection, no calls.

  To account for this, some providers offer failover options like diverting to mobile

• Not ideal in power cuts – unlike a traditional landline, VoIP won’t work during outages unless you have backup power
• Call quality can dip – if your broadband is slow or crowded with traffic

VoIP uses

Here are some examples of how VoIP can deliver an enhanced operational experience for small businesses:

VoIP for small business communication

VoIP phone systems are an excellent fit for everyday business operations, particularly in areas like customer service, sales, and general team communication. 

With features like auto-attendant, which can greet and direct incoming calls, and custom call routing, even if you’re a one-person operation, you can create a polished, professional experience for your customers without the need for a receptionist. This not only helps manage high call volumes, but can also give the impression that you’re a much larger and more sophisticated operation.

Home and remote work

For sole traders, freelancers, and small teams working from home or across multiple locations, VoIP gives you the flexibility to make and receive business calls from anywhere with an internet connection. 

There’s no need for a dedicated office phone line or physical hardware, as you can install VoIP software on smartphones, laptops, or tablets. This ensures consistent, professional communication with clients and colleagues, whether you’re working from your kitchen table or a coworking space.

International businesses

If your business has clients, partners, or suppliers overseas, VoIP makes international communication far more affordable. 

You can call international numbers at a fraction of the cost of traditional phone services, or even better, set up virtual numbers in different countries. This allows you to present a local presence in multiple markets, improving trust and accessibility for international customers.

How to set up VoIP

Setting up a VoIP phone system is surprisingly straightforward, and for most small businesses, the transition can be done without needing complex or expensive hardware.

Here’s a breakdown of what you’ll need to get started, along with some optional extras that can improve your system.

Equipment and setup

A reliable broadband connection

Because VoIP calls are transmitted over the internet, a stable and high-speed broadband connection is essential. Even standard fibre broadband available across the UK will usually be sufficient for small teams. However, for best results, we’d recommend a minimum speed of 100 Mbps. A static IP address may be required by some VoIP providers.

VoIP provider subscription

Your subscription to your preferred VoIP provider is what gives you access to essential features like phone numbers, call management, voicemail, and more.

Most services are billed monthly or annually per user, with costs typically ranging from around £5 to £30 per user, per month, depending on the features you select.

Devices

One of the key benefits of VoIP is its device flexibility. You don’t need a traditional desk phone. Instead, your team can make and receive calls using:

• Smartphones – through a VoIP app, which allows you to receive calls to your business number on your personal mobile
• Desktop or laptop computers – via softphone software installed directly on your device or even just a browser-based VoIP platform. This is an easy way to deploy VoIP for a business team
• VoIP-enabled desk phones – while desk phones aren’t essential, some people prefer using handsets, and they can deliver clearer and more reliable call quality than apps and software

Optional hardware

If necessary, you may also want or need to use:

• Headsets – a quality headset with a built-in microphone can provide clearer audio, reduce background noise, and provide hands-free calling, which is particularly helpful for team members who multitask or work in shared spaces
• ATAs (Analog Telephone Adapters) – if you already own analogue desk phones and don’t see the need to replace or dispose of them, an Analogue Telephone Adapter (ATA) lets you convert them into VoIP-compatible devices.

  It can save you money and make the transition to VoIP easier

Cost overview

Here are some ballpark figures for the initial and ongoing costs of installing a VoIP phone system. 

Top-rated VoIP providers

Virtual Landline

Price from: £4.50 per user per month

• Wide choice of UK local and memorable numbers
• Call forwarding, hunt groups & recording
• Free mobile & desktop apps

A flexible, low-cost VoIP provider specialising in virtual numbers, Virtual Landline is ideal for startups, remote teams, and businesses wanting to create a local presence or relocate. Its call rates are among the most competitive on the market, and its self-service portal is handy for businesses that need to be responsive to changing demands. 

bOnline

Price from: £7 per user per month

• Voice & video calls with document sharing
• Call flows and personalised voicemail
• Business hours & device flexibility

A budget-friendly VoIP service designed for startups and small businesses that want essential features for a low cost.

RingCentral

Price from: £12.99 per user per month

• 24/7 support and 100-4,000 inclusive minutes
• Team messaging and video conferencing
• Call recording on demand

A scalable all-rounder with great collaboration tools for large teams, integration with leading software, and 24/7 support.

Vonage

Prices from: £10 per user per month

• Virtual receptionist and call monitoring
• Desktop and mobile video collaboration
• Over 96 international number options

An ideal choice for businesses with international customers, Nextiva offers flexible calling, strong collaboration tools, and global reach.

Nextiva

Prices from: £22 per user per month

• Unlimited calling, SMS, and video conferencing
• Auto attendant and screen sharing
• Integrated CRM and helpdesk tools

A feature-rich VoIP system with excellent customer service and productivity tools. It’s a good option for growing teams that want everything in one place.

Final thoughts

VoIP phones are the perfect alternative to traditional landlines. They not only help your business look more professional to your customers but can also help it to grow more quickly.

And with the UK’s landline switch-off coming in 2027, the time to upgrade is now.

Whether you’re running a solo operation or managing a growing team, VoIP offers advanced communications that can be deployed quickly and for a fraction of the cost. It’s flexible, scalable, and packed with features that help you serve customers better and work smarter.