Tax in the hair and beauty industry
There are many different ways to work in the hair and beauty industry. You might be employed by a salon, rent a chair, or visit clients in their homes.
How you work affects how you’ll need to pay tax, so it’s important to take time to understand what it means for you.
Are you employed or self-employed?
When it comes to tax, you’re either employed or self-employed. This is called your ‘employment status’. It’s decided by how you actually work day-to-day, not just what your contract says.
Knowing your employment status
You’re probably employed if the salon:
- sets your working hours and days
- books clients for you
- provides products
- sets your work tasks
- pays you a set salary
- decides when you can take time off
Full-time stylists would usually fall into this group and salon apprentices should always be classed as employed.
You’re probably self-employed if you:
- decide when and where you work
- find your own clients and set your own prices
- buy your own products and equipment
- only earn money when you have bookings
- take your own payments
Chair renters, mobile stylists and beauty therapists who visit clients’ homes are examples of people who usually fall into this group.
Key thing to remember:
It’s very important that you know your employment status because employees and self-employed people pay tax differently. If someone has been wrongly classed as self-employed (when they’re actually employed), that person and the business that hired them could face a bill for unpaid tax, interest on the unpaid tax, and even fines.
Many people in the hair and beauty industry work in a mixture of ways – they may be employed by a salon and take on private clients on the side. If that’s you, it’s likely that you’re both employed and self-employed.
Helpful tip:
We have a free online tool called Check Employment Status for Tax on GOV.UK that can help you work it out.
If you’re employed, your salon or employer will handle your tax and National Insurance. They’ll take it from your wages before you’re paid through the ‘Pay As You Earn’ (or PAYE) system. You don’t need to do anything.
If you’re self-employed, you’ll need to handle your own tax and National Insurance, and you may need to send us a tax return.
Self-employed people send us a tax return
When you work for yourself, the way you pay tax is different to working for a salon. You need to let us know how much money you’ve made each year, so we can make sure you pay the right amount of tax and National Insurance.
When you tell us your income, you can take off some of the money you spent on running your business – like equipment or utility bills. These are called your business expenses. This leaves you with your profit – and that’s the bit you’ll pay tax and National Insurance on.
Helpful tip:
You can find out more about what counts as a business expense on GOV.UK.
There are two ways of sending a tax return – Self Assessment or Making Tax Digital for Income Tax. We’ll let you know which you need to do.
Key thing to remember:
If you’re a sole trader, the way you send us information about your income is changing. It’s called Making Tax Digital for Income Tax. For some people, that change starts from April 2026.
If you use Making Tax Digital for Income Tax, things work differently to Self Assessment. You should check if the different rules apply to you. Find out if you need to use it, when to start, and how to get ready for it on our Making Tax Digital for Income Tax page.
And you can find out more about Self Assessment on this page.
Tax rules for tips
As you work in the hair and beauty industry, you might receive tips from your customers. How you receive those tips will decide how they’re taxed.
If tips are paid to you through your employer (so in your wages) they will be treated as employment income and you don’t need to do anything. Any tax you owe will have been taken, or ‘deducted’, from your wages through PAYE before you’re paid.
However, if tips are given to you directly by a customer, then you’ll owe Income Tax and you need to let us know about them.
You can find out more about when and how to let us know about your tips on GOV.UK.
Understanding VAT as your business grows
Value Added Tax (VAT) is a tax that’s added to some of the things we buy. It’s usually already been added in the price.
But how does that work when you’re the one setting the price?
If you’re self-employed, you won’t need to worry about VAT until your ‘turnover’ is more than £90,000 in any rolling 12-month period . Turnover is the total amount of money your business makes from sales, before you take off any tax or expenses. At this point, you need to register for VAT with us.
Once you register for VAT, you’ll need to start adding VAT onto the price of your products or services. You can find out how to do this and about rolling 12-month periods on our VAT page.
If you’re a salon owner who rents out chairs, you may need to think about adding VAT onto the rent you charge.
Helpful tip:
VAT-registered businesses can claim back the VAT they spend on things for their business – like equipment or supplies. So, even if you’re not earning over £90,000 yet, you might want to register your business with us anyway to claim back VAT.
You can find out more about becoming a VAT-registered business on GOV.UK.
Feel tax confident
Getting things right from the start can help you avoid any problems later. It also means you’ll be able to start claiming certain expenses sooner if it turns out you’re self-employed.
Helpful tip:
It can be useful to speak to an accountant or tax agent who can offer advice that’s personalised to your business.
Whether you’re just starting out or changing how you work, we can help fill in the gaps in your knowledge. Once you know where you stand, you can plan ahead, set aside the right amount of money for your tax bill, and focus on building your business or career with confidence.