Tax deduction in the hair and beauty industry

As a salon owner, you will likely be registered as self-employed. Even if you run a limited business, you will still need to file a self-assessment tax return every year. You should only be taxed on your profit, so it’s important to keep track of your allowable expenses throughout the year.

If you record your expenses and retain proof of purchase (receipts) then you will be able to reduce your tax bill. But it’s important that you only claim for the tax deduction you are allowed to use. In this article, we’ll share some of the expenses you can claim for as a self-employed salon owner or stylist.

Your allowable expenses include:

  • Business running expenses, including legal, financial and workplace expenses.
  • Accounting and legal charges.
  • Up to £500 in banking and credit card charges.
  • Interest on loans and hire purchase agreements.
  • Leasing payments.
  • Rent, business rates and insurance,
  • If you work from home a percentage of the time, then you will also be able to claim expenses such as heating, electricity and water bills.
  • Chair fee (if you rent a booth),
  • Salon running software, like Salon Iris.
  • Phone bills, including your landline and mobile.
  • Internet bills.
  • Postage.
  • Marketing and advertising costs, including social media advertising.
  • Website hosting, including domain name, SSL registration and maintenance fees.

You can also claim for professional expenses that are linked to your industry, including membership to professional bodies, industry magazines or insurance. You can also claim for training, including the cost of travel and accommodation if you have to stay overnight.

And finally, you can claim for the cost uniforms, branded clothing and cleaning your uniforms. If you don’t have a special uniform and simply work in your own clothes, you will not be able to claim for this. And when it comes to calculating your cleaning fees, the HMRC usually recommends that you claim for around £60 per year with this tax deduction rather than working it out per wash.

Travel expenses

As a mobile technician, you can also claim for the costs of running your car and travel. You will need to keep track of your business mileage, as it will be calculated down to the mile. Travel costs you can claim for include:

  • Fuel.
  • Repairs and regular maintenance.
  • Road tax, MOT and insurance.
  • Cleaning.
  • Parking and toll roads.

If you use your car for personal and professional use, then you will need to calculate how much is professional and how much is personal. If 75% of your car use is for your work and the other 25% is personal use, then you could only claim for 75% of your road tax, MOT and insurance charges.

This is why it is so important to keep track of your business mileage. You can claim 45p per mile for the first 10,000 miles and 25p for any mileage above this amount. This includes your depreciation allowance.

And if you aren’t a mobile stylist, you can claim on journeys to temporary workspaces, such as travelling to a client’s home or to an industry event.

Other travel costs which are permissible include public transport, accommodation for overnight stays, food, drink and parking fees. This is only for expenses related to your work, such as travelling to a competition and staying overnight.

Capital allowances

There are certain items you use for your business that can offer some tax relief. This can also be applied to assets you have in your possession before starting your business. For more help in understanding how this works, we recommend consulting the HMRC website.

Staff expenses

Paying staff and contractors can also help to reduce your tax liability. Allowable expenses linked to your staff include:

  • Staff salaries
  • Agency fees
  • Contractor fees
  • Employer’s National Insurance

Equipment fees

The products and equipment you use in your salon could also help to reduce your tax liability. Allowable expenses in this category include:

  • Products used for treatments and services
  • Retail products
  • Consumables
  • Furniture

Throughout the year it’s important to keep hold of receipts as this is the only way to prove to HMRC that your expenses are allowable under that specific tax deduction. It makes sense to keep hold of your receipts and proof of expenses for up to 6 years.