How to Create Archives for Custom Taxonomies in WordPress

Step 1:
1. Creating a Custom Post Type
To create a custom post type, add the following code in your theme’s functions.php file

add_action('init', 'create_post_type');

function create_post_type()
{
	register_post_type(
		'project',
		array(
			'labels' => array(
				'name' => __('Projects'),
				'singular_name' => __('Project'),
				'all_items' =>  __('All Projects')
			),
			'public' => true,
			'has_archive' => true,
			'supports' => array('title', 'editor', 'thumbnail', 'revisions')
		)
	);
}

2. Creating a Hierarchical Taxonomy
To create a hierarchical custom taxonomy like categories which can have parent and child terms, add the following code in your theme’s functions.php file

add_action( 'init', 'create_projects_hierarchical_taxonomy', 0 );
  
function create_projects_hierarchical_taxonomy() {
  $labels = array(
    'name' => _x( 'Project Categories', 'taxonomy general name' ),
    'singular_name' => _x( 'Category', 'taxonomy singular name' ),
    'search_items' =>  __( 'Search Categories' ),
    'all_items' => __( 'All Categories' ),
    'parent_item' => __( 'Parent Category' ),
    'parent_item_colon' => __( 'Parent Category:' ),
    'edit_item' => __( 'Edit Category' ), 
    'update_item' => __( 'Update Category' ),
    'add_new_item' => __( 'Add New Category' ),
    'new_item_name' => __( 'New Category Name' ),
    'menu_name' => __( 'Categories' ),
  );    
 
  register_taxonomy('project_categories',array('project'), array(
    'hierarchical' => true,
    'labels' => $labels,
    'show_ui' => true,
    'show_in_rest' => true,
    'show_admin_column' => true,
    'query_var' => true,
    'rewrite' => array( 'slug' => 'project-category' ),
  ));
}

3. Creating a Non-hierarchical Taxonomy
To create a non-hierarchical custom taxonomy like Tags, add the following code in your theme’s functions.php file

add_action( 'init', 'create_projects_nonhierarchical_taxonomy', 0 );
 
function create_projects_nonhierarchical_taxonomy() {
  $labels = array(
    'name' => _x( 'Project Tags', 'taxonomy general name' ),
    'singular_name' => _x( 'Tag', 'taxonomy singular name' ),
    'search_items' =>  __( 'Search Tags' ),
    'popular_items' => __( 'Popular Tags' ),
    'all_items' => __( 'All Tags' ),
    'parent_item' => null,
    'parent_item_colon' => null,
    'edit_item' => __( 'Edit Tag' ), 
    'update_item' => __( 'Update Tag' ),
    'add_new_item' => __( 'Add New Tag' ),
    'new_item_name' => __( 'New Tag Name' ),
    'separate_items_with_commas' => __( 'Separate tags with commas' ),
    'add_or_remove_items' => __( 'Add or remove tags' ),
    'choose_from_most_used' => __( 'Choose from the most used tags' ),
    'menu_name' => __( 'Tags' ),
  ); 
  
  register_taxonomy('project_tags','project',array(
    'hierarchical' => false,
    'labels' => $labels,
    'show_ui' => true,
    'show_in_rest' => true,
    'show_admin_column' => true,
    'update_count_callback' => '_update_post_term_count',
    'query_var' => true,
    'rewrite' => array( 'slug' => 'project-tag' ),
  ));
}

Step 2:
Go to Admin Dashboard -> Settings -> Permalinks and click on the “Save Changes” button at the bottom of the page.