Bus deregulation in Great Britain came into force on 26 October 1986, and is formally known as the 1985 Transport Act.

The 'Buses' White Paper (under the Conservative government of Margaret Thatcher) was the basis of the 1985 Transport Act which provided for the deregulation of local bus services in the whole of the United Kingdom except for Northern Ireland and Greater London. It proposed the abolishing of road service licensing and the allowed for the introduction of competition on local bus services for the first time since the 1930s.

Two kinds of bus service can be provided: commercial and subsidised. Any bus operator can run whatever commercial services it wanted to as long as it gives 42 days notice of an introduction of a new service, withdrawal of a service or timetable changes. Commercial services are not eligible for any subsidy (except for the provision of concessionary fares) but can charge whatever fares they wanted.

The only cross-subsidy allowed is for commercial reasons, e.g. for a large operator to maintain its network at all times of the day so to keep customer loyalty or so to maintain the attractiveness of that company’s travelcard (one which is only valid on that operator). However, this was later amended to allow for 'Quality Partnerships' between local authorities and operators, where an operator agrees to improve a service, in return for infrastructure improvements paid for by the local authority (usually bus lanes or bus stops/shelters).

If there are gaps in the commercial bus network, local authorities (in shire counties) and PTEs (in metropolitan areas) are able to design bus services which bus operators can be paid to operate. These are routes which the local authority or PTE considers as socially necessary, but are not commercially viable. The fares, routes and times of these subsidised services are set by the local authority or PTE. However, local authorities and PTEs are required to seek competitive tenders for these services.

Subsidised services in urban areas (also known as tendered services) are often evening, early morning or Sunday journeys on routes which are commercial during the day on Monday to Saturday. Many rural routes are subsidised at all times of their operation.