Making Tax Digital for hairdressers, barbers and beauty therapists

For a self-employed stylist, therapist or barber, tips are part of the takings. That includes cash left at the chair and tips added on the card machine. The card tips are already in your bank statements, so leaving them out of your records creates a gap that is easy to spot. The cash ones are easy to forget.

The simplest habit is to record tips with the service they came with, at the end of each day. If you rent a chair and the salon’s card machine takes your clients’ payments, ask the owner for a weekly statement that shows your services and tips separately, and keep it with your records.

If you rent a chair, the rent is your main cost. Whether you pay a flat weekly amount or a percentage of what you take, record each payment when you make it. If the salon takes your clients’ payments and pays you the balance, record your full takings as income and the salon’s share as an expense, not just the net amount you receive.

If you own the salon, the chair rent you receive is income for you. How it is classed depends on what you provide with the chair: reception, products, towels, laundry and the use of the salon. Ask your accountant to set the right category up once, so every payment goes in the same place.

Either way, it is worth checking that a chair-rental arrangement really is self-employment. A stylist who works set hours, uses the salon’s prices and is told how to work may be an employee in practice, whatever the agreement says. HMRC’s employment status guidance explains the tests.

Product sales are part of your takings, and they count towards the £30,000 threshold just as services do. The products you buy in are an expense, recorded when you pay for them under the cash basis. A big stock order before Christmas will lower that quarter’s profit, and the sales will lift the next.

Gift vouchers need care. The money comes in when the voucher is sold, often in December, and the service happens later, sometimes months later. Record the sale when the money arrives, and keep a list of vouchers still to be redeemed, so the appointment is not recorded as new income a second time.

Ask whether they already look after salons or chair renters, whether they can connect your booking or card system to the software, and how they handle tips and gift vouchers. If you own a salon with chair renters, ask how they will class the chair rent, and whether they will look at the status of the arrangement with you.

For the general rules, see Making Tax Digital for the self-employed, or check your start date with the MTD checker. If missed calls are costing you bookings, our page on AI receptionists for salons explains how they take bookings while you work.