Running a hairdressing business or beauty salon is about far more than scissors, schedules, and satisfied clients. Behind the scenes, you’ve got important tax responsibilities to manage too.
If you’re working in the hair and beauty industry, some of the common taxes you may need to pay include:
- Income Tax
- National Insurance
- VAT (if applicable)
- Corporation tax (for limited companies)
Understanding which of these taxes apply to you will keep you compliant and help you avoid any unexpected tax bills or missed payments. Keep reading as we break it all down so you know where you stand, based on what we see every day working with salon owners, self-employed hairdressers, and beauty therapists.
Contact Ascott Blake today for friendly, expert tax advice that keeps tax worries out of your hair.
How does employment status affect tax in the hair and beauty industry?
Correct employment status is one of the most important and easily misunderstood tax issues in the hair and beauty industry. With arrangements like chair rentals, freelancers, and self-employed stylists so common in salons, it’s not always clear how you should be classed.
Your employment status determines how much tax and National Insurance are paid and who is responsible for them (self-employed people, employers, or employees). Getting it wrong can have serious consequences, including unexpected tax bills to pay, late penalties, and heat from HMRC.
- If you’re self-employed, you are responsible for filing your own Self Assessment tax return and paying Income Tax and National Insurance.
- If you are employed, it’s the salon owner’s responsibility to operate PAYE, deduct tax and National Insurance, and pay employer National Insurance contributions.
But what happens if you rent a chair in a salon?
Chair rental arrangements are common in many salons, but they must be set up correctly and can easily get confusing. Even though you’re self-employed and choose your own work schedule, it can seem like you’re an employee. You work from the salon and see regular clients there.
You might be treated like an employee but miss out on the benefits like holiday and sick pay. From a tax point of view, this grey area can create issues.
For tax purposes, HMRC may look at these factors:
- Who sets the working hours or schedule
- Who provides the tools and products
- Who sets prices and takes payments from clients
- Whether the individual can work for other hairdressers or salons
- Whether there are employment rights, such as holiday pay or sick pay
If it is clear that you are self-employed, then you will be responsible for your own taxes. But if HMRC decides a chair renter should have been treated as an employee, the salon owner could be required to pay backdated Income Tax and National Insurance, along with penalties and interest.
Income Tax for hair and beauty business owners
If you are a self-employed hairdresser, self-employed stylist, beauty therapist, or mobile hairdresser, you will usually pay Income Tax through the Self Assessment system.
Income Tax is calculated on your profits, not your total income. This means your gross income minus allowable business expenses.
You must:
- Register for Self Assessment
- Keep accurate records of income and expenses
- Submit a tax return each tax year
- And pay Income Tax by the relevant deadlines
The amount of Income Tax you pay depends on your total income for the tax year and the current Income Tax bands. If you also have other income, this can affect how much tax you pay.
If you operate as a limited company, you usually pay yourself through a combination of salary and dividends. The company pays corporation tax on its profits, while you pay Income Tax on your personal income.
Either way, understanding your numbers is key. Many salon owners underestimate how much tax they need to pay, which can cause cash flow problems later on.
Read our blog to see whether limited company or sole trader is the best set-up for your business.
What National Insurance do hairdressers and salon owners pay?
In addition to Income Tax, National Insurance applies:
- Self-employed professionals pay Class 2 and Class 4 National Insurance based on their profits
- Employees pay Class 1 National Insurance via PAYE
- And employers with staff must also pay employer National Insurance contributions
The amount depends on your income, employment structure, and business setup.
Is VAT chargeable for hair and beauty services?
You only need to register for Value Added Tax (VAT) if your taxable turnover exceeds the VAT registration threshold, which as of January 2026 is currently £90,000 in any 12-month period. This includes all standard-rated services, such as hairdressing services and most beauty treatments.
Since it can affect your pricing, profit margin, and competitiveness, it’s important to understand if you actually need to register, and it’s a good idea to plan ahead.
Once you are VAT registered, you must:
- Charge VAT on applicable services
- File VAT returns
- Pay VAT to HMRC
- Keep VAT-compliant records
Do hairdressers charge VAT on hairdressing services?
Yes, if you’re VAT-registered, you’ll need to start charging VAT on applicable services at the standard rate of VAT, including the following services:
- Hair cutting and styling
- Hair colouring
- Blow dries and treatments
VAT is charged to clients and then paid to HMRC via your VAT return. This is also how you reclaim VAT on eligible business expenses such as hair and beauty equipment and products.
When does a beauty salon need to register for VAT?
If your salon’s taxable turnover goes over the VAT threshold (£90,000), you must register for VAT and start charging it on your services. This includes income from services, retail product sales, and any other VAT-able income.
Some salons choose to voluntarily register for VAT even if they are below the threshold. While this might seem like more work, it can make sense if you have high VAT-able costs and want to reclaim VAT, or if your clients are mostly VAT-registered businesses.
If VAT feels like a complex responsibility, there are also schemes such as the Flat Rate Scheme that can simplify VAT accounting for some salon businesses. Under the flat rate, you pay a fixed percentage of your gross turnover as VAT, but this usually means you can’t reclaim VAT on most purchases.
What business expenses can hair and beauty businesses claim?
When you run a hair or beauty business, you’re doing far more than just keeping your clients looking good. You’re creating an experience so they feel good too. That means investing in quality equipment to deliver a luxury experience, furniture that’s as chic as it is comfortable, products to line your salon shelves, and the tools that keep it running day to day. The costs can quickly add up.
The good news is that you can claim many of these everyday costs as tax-deductible business expenses. If you use an expense solely for your business, you can usually deduct it from your income. This way, you only pay tax on your actual profits, not the total amount you earn.
Here are some common expenses you can deduct as a hairdresser or beauty salon owner:
- Salon rent or chair rental fees
- Tools and equipment for hairdressing
- Supplies for beauty treatments
- Hair dyes and other salon products
- Work clothing or uniforms (as long as they aren’t everyday clothes)
- Training courses related to your services
- Costs for marketing, advertising, and your website
- Business insurance
- Accountancy fees
- Travel expenses, including mileage for mobile hairdressers
- Software and booking systems
- Utility bills and phone costs for the business
And remember, if you’re VAT registered, you may also be able to reclaim VAT on many of these expenses, provided they relate to taxable supplies.
Need help managing your taxes? Get in touch
Running a hair or beauty business is demanding enough without having to worry about tax deadlines and HMRC rules. But managing your taxes does give you an opportunity to get smarter with your finances.
Call Ascott Blake today on 01279 797 222 or contact us online and discover how we take care of your beauty salon taxes. We’ll help you stay compliant, plan ahead, and focus on your clients.
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