Choosing to work independently as a hairdresser or barber offers the flexibility to build your own client base, set your own hours, and decide how you operate. But with independence comes new responsibilities, especially when it comes to your finances and tax obligations. To run your business effectively, understanding how to manage your income and file your taxes is crucial. This guide will walk you through the essential steps of getting started with tax as a self-employed hairdresser.
Registering with HMRC
Once you’ve decided to go self-employed, your first step is to register with HMRC. This process is essential to ensure you are compliant with tax laws. Registration must be completed as soon as you start earning income from your services. Once you’ve registered, you will be issued a Unique Taxpayer Reference (UTR) number, which you’ll need when filing your annual tax return.
As a self-employed person, you’ll be required to complete a Self Assessment each year, reporting all income and business-related expenses. You’ll also be registered for Class 2 and Class 4 National Insurance contributions, which fund your entitlement to various state benefits, including the State Pension.
Understanding the Self Assessment System
The Self Assessment tax return covers income earned during the tax year from 6 April to 5 April. You need to file your return by 31 January following the end of the tax year. Along with your return, you must pay any tax and National Insurance you owe.
If your turnover exceeds the VAT threshold, which is currently set at £85,000, you will also need to register for VAT. However, most self-employed hairdressers starting out will fall below this threshold.
Setting Up Business Finances
Separating your business and personal finances is a crucial early step. Open a dedicated business bank account to make it easier to track income and expenses. This separation helps you stay organised and simplifies your Self Assessment return.
You should also keep a portion of your earnings aside to cover future tax liabilities. Many experts suggest saving around 20% to 30% of your profits. This buffer will help you avoid cash flow problems when it’s time to pay your tax bill.
Choosing Your Business Structure
Most self-employed hairdressers operate as sole traders. This setup is straightforward, requires minimal paperwork, and allows you to keep all profits. However, you are personally liable for any business debts.
Some choose to register as a limited company to benefit from tax efficiency or limited liability. Running a limited company comes with additional responsibilities, such as filing annual accounts and company tax returns, so it’s important to weigh the pros and cons before making this decision.
Keeping Accurate Records
Keeping detailed financial records is essential. This includes recording all sales, income, business expenses, receipts, invoices, and bank statements. These records must be kept for at least five years after the 31 January submission deadline of the relevant tax year.
Digital recordkeeping is highly recommended, especially with the gradual rollout of Making Tax Digital. Online accounting software helps you track income and expenses in real time, generate reports, and stay on top of important dates.
Understanding Allowable Expenses
To reduce your taxable profit, you can claim allowable expenses that are necessary for running your business. Common expenses for self-employed hairdressers include:
- Rent for salon space or chair rental fees
- Utility bills including water, electricity, gas, internet, and phone (proportional to business use)
- Consumable hair products used during appointments
- Hairdressing tools such as scissors, dryers, clippers, and brushes
- Business insurance including public liability and professional indemnity
- Uniform or work-specific clothing
- Marketing and advertising including websites and promotional material
- Travel costs incurred for business purposes
- Training courses and workshops related to hairdressing or salon management
Only claim expenses that are solely for business use, or for the business portion if there is mixed use. For example, if you use your home internet for both business and personal use, you should only claim a reasonable portion for business purposes.
Using Technology to Simplify Accounting
Modern accounting software can make managing your business finances easier and less time-consuming. These platforms allow you to log income and expenses, upload receipts, create invoices, and generate tax summaries.
By using digital tools, you reduce the chance of errors, stay compliant with changing tax regulations, and avoid the stress of sorting through paperwork when deadlines approach. Many tools now offer mobile apps, enabling you to manage your accounts while on the go.
National Insurance Contributions
As a self-employed individual, you are responsible for paying two types of National Insurance:
- Class 2 contributions, which are a fixed weekly amount payable if your profits are above a certain threshold
- Class 4 contributions, which are calculated as a percentage of your annual profits
Both are paid through the Self Assessment system. Keeping up with these contributions ensures you remain eligible for state benefits.
Budgeting and Pricing Your Services
Set prices that reflect your skills, the market in your area, and your business costs. Factor in the time spent on each appointment, product use, rent, insurance, and tax obligations when deciding on service charges.
Managing cash flow is equally important. Income may fluctuate depending on the season or client bookings. Having a budget in place and a savings buffer can help you manage quieter periods without financial strain.
Insurance and Professional Protection
Having the right insurance is essential to protect both your clients and yourself. Public liability insurance is a must, especially if you operate in a salon or visit clients’ homes. You may also want to consider cover for your tools and stock, as well as personal injury insurance in case of an accident.
Staying compliant with legal requirements and having protection in place will give you peace of mind and help your business appear more professional to clients.
Networking and Growing Your Client Base
Building a loyal client base takes time and effort. Offer consistent quality, engage with clients on social media, and consider joining local business networks. Word-of-mouth referrals can be powerful, especially when paired with strong online reviews and a visible web presence.
You can also collaborate with other local professionals or participate in community events to raise awareness of your services.
Preparing for Tax Deadlines
Mark key dates in your calendar, especially the 31 January online submission deadline and the 31 July payment on account deadline if it applies to you. Missing these deadlines can result in fines and interest charges.
Regularly updating your financial records means you’ll have everything you need when the deadline approaches. Don’t leave things until the last minute. Consider setting monthly reminders to review and update your accounts.
Keeping Business Compliant
Stay informed about changes in tax law, especially those affecting small businesses. Subscribe to official newsletters or follow HMRC updates to keep up with new rules. Regular reviews with a financial adviser or accountant can also help ensure your records and claims are accurate.
Taking time to understand your tax responsibilities will save you stress and money in the long run. Being proactive, organised, and informed is key to running a successful self-employed hairdressing business.
Introduction to Claiming Expenses
Once your self-employed hairdressing business is up and running, knowing how to correctly handle your expenses becomes vital. We focus on identifying and managing deductible business costs. Every legitimate expense you claim reduces your taxable profit, meaning you keep more of your income. Yet many hairdressers overlook or under-claim these deductions due to confusion or lack of awareness.
Understanding the types of expenses you’re entitled to claim and maintaining clear, well-organised records can significantly lighten your tax burden. With accurate recordkeeping and a disciplined approach, you can ensure compliance with HMRC while also taking advantage of every available deduction.
What Counts as an Allowable Business Expense?
Allowable business expenses are costs that are incurred wholly and exclusively in the course of running your business. If the expense has a mixed-use purpose (for example, internet used for both personal and professional reasons), then only the business portion can be claimed. It’s essential to keep documentation that supports each claim, in case HMRC requests evidence.
For self-employed hairdressers, common examples of allowable expenses include:
- Rent for salon space or chair
- Hair care and styling products used during appointments
- Tools and equipment including scissors, clippers, straighteners, dryers, and brushes
- Professional insurance, including public liability, contents, and personal injury cover
- Training courses and certification updates
- Marketing and promotion costs, such as business cards, online advertising, and printed flyers
- Website development and maintenance fees
- Uniforms or clothing with your business logo
- Utility bills for a salon or home-based workspace
- Travel expenses to clients or suppliers, excluding regular commuting
- Office supplies and postage
Equipment and Tool Purchases
Purchases of work-related tools and equipment are fully claimable as business expenses. These include items essential for delivering your service, such as scissors, razors, straighteners, combs, and chairs. If the item is durable and expected to last several years, it may fall under capital allowances instead of day-to-day expenses.
It’s worth noting that capital items like hairdryers, salon chairs, or mirrors can be claimed over several years under the annual investment allowance. Keeping a list of what you’ve bought, when it was purchased, and for how much will make tax filing easier.
Mobile and Internet Usage
Many self-employed hairdressers use their mobile phones and home internet connections for business. If you use your phone for booking appointments, marketing, or ordering supplies, you can claim a portion of the monthly cost as a business expense. The same applies to your internet bill if you use it to update your website, email clients, or manage bookings.
The key is to calculate the percentage used for business purposes and apply it to your monthly bill. For example, if 50% of your phone usage is business-related, you can claim half the cost.
Utility Bills and Working from Home
If you operate from home, you can claim part of your household bills as business expenses. This includes heating, electricity, rent or mortgage interest, council tax, and water. You’ll need to apportion costs based on the space used for business and the amount of time it’s used.
There are two main ways to calculate this:
- Simplified expenses – HMRC provides a flat-rate based on hours worked from home each month.
- Actual costs – This involves a more detailed calculation, taking into account the proportion of your home used for business and how much time is spent working there.
If you rent a salon space, your rent, utilities, and related costs are straightforward business expenses, and you can claim them in full.
Travel and Transport Costs
Hairdressers who travel to clients’ homes or visit suppliers can claim travel expenses. This includes public transport fares, fuel costs, parking fees, and tolls. You can also claim mileage if you use your personal vehicle for business travel.
Keep a detailed log of your journeys, including the date, destination, purpose of the trip, and distance covered. HMRC allows you to use standard mileage rates (currently 45p per mile for the first 10,000 miles) or actual costs (fuel, maintenance, insurance) with a proportion calculated for business use. It’s important not to claim travel from home to your regular salon or workplace, as this is considered ordinary commuting and not allowable.
Marketing and Advertising
Promoting your services is an essential part of running a hairdressing business, and many marketing costs are deductible. Examples include:
- Designing and printing flyers and business cards
- Advertising in local publications
- Social media promotions and paid ads
- Photography for your online portfolio
- Website domain, hosting, and updates
If you’ve hired a third party to assist with your marketing or manage your online presence, their fees can also be claimed.
Training and Professional Development
Ongoing education is important in the hair and beauty industry. If you enrol in courses that update or enhance your existing skills, the cost is a deductible business expense. These could include workshops, advanced hair styling classes, product training, or health and safety certifications.
However, initial training to become a hairdresser is not claimable if it was completed before you started your business. Only courses taken after your business is up and running count.
Insurance and Subscriptions
Business-related insurance is necessary and fully claimable. This includes public liability insurance, business contents cover, and other policies protecting your tools and premises. If you’re a member of a professional trade body or subscribe to industry magazines, these costs also qualify as allowable expenses.
Subscriptions that help you stay informed or improve your services should be business-related and relevant to your profession. Avoid claiming subscriptions that serve primarily personal interests.
Uniforms and Protective Clothing
If you wear branded clothing or protective garments while working, the cost of these items can be claimed. This could include tunics, aprons, or clothing with your business logo. General everyday clothing, even if worn for work, is not deductible unless it is recognisably part of your business uniform.
Keep all receipts, and note when and why the clothing was purchased. This helps if your expense claims are ever queried.
Office Supplies and Software
If you use a computer, phone, or tablet to manage bookings, create marketing content, or do admin work, a portion of the hardware and software costs can be claimed. Subscriptions to scheduling apps or business management tools fall under this category.
You can also claim for items like notebooks, pens, folders, ink cartridges, and postage used in your business operations. Keep itemised receipts and track business use to avoid confusion.
Client Refreshments and Hospitality
If you provide drinks or snacks to clients during appointments, these costs are considered part of your service and are claimable. However, you cannot claim the cost of meals for yourself unless you are travelling overnight for business purposes.
Hospitality costs intended to entertain clients outside of work are not allowable. Stick to light refreshments offered in the course of your professional service.
Recording and Organising Your Expenses
Effective recordkeeping is the cornerstone of successful tax management. Maintain digital or physical records of all receipts, invoices, and bank statements. Categorise expenses by type and regularly update your books rather than waiting until the tax deadline.
Using cloud-based accounting software can help automate this process. Many platforms allow you to scan receipts, log transactions, and create custom categories. Staying organised throughout the year means less stress at tax time and reduces the risk of overlooking valid claims.
Staying on the Right Side of HMRC
Always be honest in your claims and ensure expenses are business-related. HMRC may request to see your records, especially if something appears inconsistent. False claims can result in fines, penalties, or investigations.
If you’re unsure about whether something qualifies as an allowable expense, seek guidance or refer to official resources. When in doubt, it’s better to be cautious.
Benefits of Claiming All Eligible Expenses
Maximising your expense claims has two major benefits: it reduces your tax bill and gives a more accurate picture of your business’s financial health. By reducing your taxable profit, you pay less in income tax and National Insurance.
Keeping your expenses up to date also helps with forecasting and budgeting. You’ll have clearer insight into your profit margins, making it easier to make informed business decisions.
Self Assessment Filing
Once you’ve mastered managing your business expenses and organising your records, it’s time to tackle your Self Assessment tax return. For self-employed hairdressers, filing this return accurately and on time is essential to stay compliant with HMRC and avoid penalties. We’ll walk through the entire Self Assessment process, from preparation to submission, with helpful tips to make it as straightforward as possible.
When and How to Register for Self Assessment
If you’re newly self-employed, you need to register for Self Assessment by 5 October following the end of the tax year in which you started working for yourself. For example, if you began your hairdressing business in July, you’d need to register by the following October.
You can register online through the HMRC website. Once registered, you’ll receive a Unique Taxpayer Reference (UTR) number and instructions for setting up your online tax account. Keep this number safe, as it’s used every time you communicate with HMRC.
Key Deadlines to Remember
Understanding the Self Assessment timeline is critical to avoid missing deadlines:
- 5 October – Deadline to register for Self Assessment if you’re newly self-employed
- 31 October – Deadline to file a paper tax return for the previous tax year
- 31 January – Deadline to file your online return and pay any tax owed
- 31 July – Second payment on account deadline if applicable
Failing to meet these deadlines can result in automatic penalties, even if you owe no tax. If you anticipate any issues meeting these dates, it’s important to act early and seek assistance if necessary.
What You’ll Need to Complete Your Tax Return
Before you begin filling out your Self Assessment return, gather all the necessary documentation and financial information. This includes:
- Your UTR number and login credentials for your HMRC account
- Your National Insurance number
- Records of income from hairdressing, including tips and cash payments
- Details of any other income, such as employment, rental income, or interest
- A full record of allowable business expenses
- Bank statements and invoices
- Information about tax reliefs or allowances you’re eligible for
The more thorough your preparation, the easier the filing process will be. Having your information ready also reduces the risk of making mistakes.
Step-by-Step Guide to Completing the Return
The online Self Assessment form is structured into different sections. You’ll begin by confirming your personal details, such as name, address, and National Insurance number. Next, you’ll move on to the main body of the return:
Income Section
Declare your income from self-employment. You’ll need to report your total turnover (all money received from clients) and your allowable expenses. The difference between the two is your profit, which forms the basis of your tax calculation.
If you have other sources of income, such as interest from savings, rental income, or dividends, you must include them in the relevant sections.
Expenses Section
List your allowable expenses carefully. Ensure they’re categorised correctly and reflect accurate totals. HMRC may ask to see records later, so retain all receipts and supporting evidence.
Common categories include rent, utilities, equipment, training, travel, and insurance. If using simplified expenses, declare the flat-rate amounts rather than detailed figures.
Tax Reliefs and Allowances
Depending on your situation, you may be eligible for certain tax reliefs. These can include:
- The personal allowance (which reduces the amount of income subject to tax)
- Marriage allowance (if applicable)
- Trading allowance (if you have very low income)
- Capital allowances (for larger purchases like equipment)
Carefully review what applies to you, and include any reliefs you’re entitled to.
Reviewing and Submitting
After entering all income and expenses, the system calculates your tax liability automatically. Review everything for accuracy. Once satisfied, submit the return. You’ll receive a confirmation email from HMRC.
Keep a digital or printed copy of your return and calculation for your records. This information is vital if you’re later asked to provide details or if you need to amend your return.
Payments on Account
If your tax bill is more than £1,000 and less than 80% of your tax is already collected at source, you may be required to make payments on account. These are advance payments toward your next year’s tax bill.
Each payment is typically half of your previous year’s bill, due on 31 January and 31 July. The final balancing payment is due by the next 31 January. It’s important to factor these payments into your financial planning.
What If You Make a Mistake?
Mistakes happen. If you realise you’ve submitted incorrect information, you can amend your tax return within 12 months of the 31 January filing deadline. Log into your HMRC account, find the relevant return, and select the option to amend.
If the error leads to an overpayment, you may receive a refund. If you’ve underpaid, interest may be charged. It’s always best to correct any mistakes as soon as possible to minimise penalties.
Dealing with Penalties and Late Filing
Missing the Self Assessment deadline triggers automatic penalties:
- An initial £100 fine if the return is up to three months late
- Additional daily penalties if it’s more than three months late
- Further charges if the return is over six or twelve months late
Interest also accrues on unpaid tax. If you’re unable to file or pay on time due to circumstances beyond your control, you can appeal and provide a reasonable excuse. Documentation supporting your situation increases the chance of a successful appeal.
Setting Aside Money for Tax
To avoid scrambling for funds at the last moment, get into the habit of saving regularly. Many self-employed professionals set aside 20% to 30% of their monthly profit to cover income tax and National Insurance.
Keeping this money in a separate savings account can make it easier to manage and remove the temptation to spend it. When tax time comes, you’ll be glad the funds are already available.
Hiring Help vs Doing It Yourself
Whether you complete your Self Assessment independently or use an accountant depends on your confidence, time, and complexity of your finances. For straightforward businesses, filing your own return can be manageable.
However, if your income sources are varied, or you want peace of mind, hiring a professional might be worthwhile. Accountants can identify tax-saving opportunities and ensure your return is compliant. Just be sure to choose someone experienced in working with self-employed clients in the hair and beauty industry.
Staying Organised Year-Round
The easiest way to simplify tax time is to stay organised throughout the year. Regularly log your income and expenses, scan receipts, and check your books monthly. Waiting until the last minute often leads to errors and missed deductions.
You should also keep an eye on changes in tax rules that may affect you. Subscribing to updates from HMRC or financial blogs can help you stay informed.
Avoiding Common Mistakes
Many self-employed hairdressers make avoidable mistakes when filing their tax return. Some of the most common include:
- Failing to register for Self Assessment on time
- Forgetting to include cash income or tips
- Overlooking allowable expenses
- Missing the filing deadline
- Not keeping proper records
Being proactive and diligent with your financial management can help you avoid these errors. It also puts you in a stronger position if your return is ever subject to an HMRC enquiry.
Preparing for HMRC Reviews
HMRC selects some tax returns for review, either at random or because something appears unusual. If this happens, you’ll need to supply documents proving the income and expenses you reported. Keeping clear, dated records of transactions, receipts, and invoices ensures you’re prepared.
If you’re selected for a review, cooperate fully and respond promptly. Often, the process is resolved quickly if your records are in good order. If you’re unsure how to respond, consider seeking professional advice.
Building a Sustainable Business
Filing your tax return is not just about compliance; it’s also an opportunity to reflect on your financial performance. Analysing your profit, expenses, and tax payments helps you set future goals, plan growth, and identify areas to improve efficiency.
Use your annual return as a chance to evaluate your pricing, services, and spending habits. Building a sustainable business involves making informed decisions, staying financially disciplined, and continuously learning about your obligations.
By understanding your tax responsibilities and approaching your return with confidence and organisation, you’ll reduce stress, save money, and focus more on what you love most—delivering excellent service to your clients.
Conclusion
Becoming a self-employed hairdresser opens the door to creative freedom, flexible working, and the opportunity to shape your own business journey. But with that freedom comes the duty to manage your tax affairs with care and precision. Failing to meet your tax responsibilities can lead to stress, penalties, and financial setbacks — none of which help a thriving business.
Throughout this series, we’ve explored the essential first steps, from registering with HMRC to understanding your legal obligations and preparing to submit an annual Self Assessment. We’ve also looked at how careful expense tracking, detailed record-keeping, and a clear understanding of what qualifies as an allowable cost can significantly reduce your tax bill. Learning how to claim for everything you’re entitled to, without overstepping HMRC’s rules, is central to making your finances work for you.
We delved into the long-term habits and strategies that can help your business grow sustainably whether it’s saving for tax bills in advance, managing your National Insurance contributions, staying on top of industry changes, or knowing when to get professional advice. Every small decision adds up over time and can make the difference between operating under pressure and running a profitable, secure business.
By staying organised, being proactive, and treating your tax affairs with the same professionalism you bring to your craft, you’ll put yourself in the best possible position to succeed. Self-employment in the hair and beauty industry can be both rewarding and resilient, especially when you have full control over your financial foundation.
With the right planning and knowledge, you can not only survive tax season, but thrive year-round — confident that your books are in order, your earnings are protected, and your future is well within reach.