HMRC has issued new tax guidance for salon owners, hairdressers, and beauty therapists to clarify how to report income for tax purposes.
Hair and beauty professionals are being urged to check their employment status to make sure they’re paying the right tax to HMRC.
The ‘rent a chair’ model makes tax reporting particularly complex as professionals might be renting a space as a self-employed person but treated more like an employee.
Who is this tax guidance for?
HMRC’s latest tax guidance explains how to work out employment status for:
- salon owners that rent a space to hairdressers or beauty therapists
- hairdressers, barbers, and beauty therapists renting space in a salon or clinic
- mobile hairdressers, barbers, or beauty therapists
Who should report income to HMRC?
Hair and beauty professionals need to work out if they’re either self-employed or employed to determine how to pay tax to HMRC.
The confusion comes when salons renting a space or chair set certain working practices (for example, business hours and clients). This can sometimes result in a self-employed stylist or therapist being in ‘disguised employment’ where they’re treated like an employee but are losing out on rights like holiday pay and sick leave. And the salon isn’t paying the right National Insurance Contributions from employee salaries.
HMRC’s latest guidance outlines how different working practices can indicate whether someone’s employed or self-employed. If the salon owner (rather than the stylist) is setting the working hours, daily tasks, and payment then that suggests they’re an employee.
HMRC’s check employment status for tax tool helps salon owners and self-employed professionals determine their tax responsibilities.
Salon owners should provide a written agreement about which services they provide and which services are provided by the stylist.
Working out tax responsibilities
| Employment status | Tax responsibilities | What do you need to do? |
| Employed | The business / salon owner pays tax to HMRC on behalf of the employee | Check employment rights and contract |
| Self-employed | Freelancers report and pay tax to HMRC | Register for Self Assessment and pay income tax and National Insurance to HMRC |
Self-employed people working through a limited company need to report income on a quarterly corporation tax return. And it’s a legal requirement to register for VAT once taxable turnover goes over £90,000.
Salon owners earning rentable income from hiring out a space or chair need to register for VAT and pay tax on these earnings.
The HMRC guidance includes example scenarios to help clarify what constitutes an employed position and when someone’s self-employed.
For example, a stylist rents a chair in a salon and pays rent to the owner of the salon. They’re self-employed as they set their own work schedule, prices, and appointments. They don’t get paid if they don’t have any appointments.
More tax guides for small business owners
- Business tax – ultimate guide for the small businesses
- What is turnover in business and how do you calculate it?
- How to open a beauty salon
- Insurance for the self-employed