More and more hairdressers and barbers are now classed as self employed which can provide the opportunity to work flexibly but you will also need to complete a yearly self assessment tax return.
It is important that you understand which expenses can be claimed as well as the calculations involved.
This will ensure that you minimise your tax liability as well as avoid any unexpected letters from HMRC!
Many self employed hairdressers and barbers rent a chair in the salon or barbershop from which they work instead of being employed directly by a manager.
Chair fees can be one of the biggest expenses that hairdressers and barbers have, so not claiming them could be costing you a fortune in unnecessary tax every year.
If you have an agreement with a salon or barbershop owner whereby you pay out a percentage of your takings in chair fees, then your monthly or weekly costs may vary, so it will be even more important to keep accurate records.
If you need to travel for work, for example to visit customers then this can be claimed as an expense.
You can claim 45p per mile for the first 10,000 business miles during the tax year and 25p per mile above 10,000 miles. You can also claim for car parking, taxi, train and bus fares.
Materials and Equipment.
Any hairdresser or barber will know how important it is to have the right tools of the trade. From basics, such as scissors, clippers and a hairdryer, to more specialised colouring and styling equipment, these can all be included as expenses on your tax return.
If you pay to repair, replace or upgrade an item such as hair straighteners or clippers then you can include the cost of this on your tax return as well. Whenever you spend money on hair care products or equipment, make a note and keep receipts or invoices for your records. It is also a good idea for you to have an idea of how much you spend on these items so that you can take into account your costs when you set your prices.
HMRC rules around clothing are strict, if you purchase clothes that you also wear outside of work time then it cannot be claimed. However, a uniform can be claimed for provided it is only worn during work.
You can also claim for any protective clothing that you have to purchase for work such as aprons and gloves.
Keeping your skills up to date and learning new ones is a vital part of being a self employed hairdresser or barber, so if you attend any training or complete any courses that are directly related to the running of your business then these are also deductible.
You can also deduct the costs of travel and accommodation where necessary, so keep your receipts, tickets and make a note of your mileage if you travel by car.
Marketing and Advertising.
It is likely that you will want to have some kind of presence on the internet when you work for yourself. Even if you set up a simple page on Facebook or another social networking site, making sure that people can find you and contact you will definitely increase your potential client base.
If you choose to have a website of your own to showcase your work and let people know about yourself, then you can deduct the costs of running it from your profits on your tax return. Website hosting, domain name registration and website maintenance all cost money which is deductible against your income.
If you use any online advertising where you have to pay for the service, then you can deduct this as well. Allowable expenses include advertising on search engines such as Google, posting ads on social networking sites like Facebook and maintaining an email contact list and sending out information to your existing clients.
You can also deduct the cost of any offline advertising, from postcards in your local shop to advertising in trade magazines or local directories.
Although it is not compulsory, it is always best to make sure you are covered to ensure that you aren’t left footing the bill if anything happens, and you can deduct the cost of your insurance against tax.
Many hairdressers and barbers work with hazardous chemicals, sharp objects and electrical equipment, meaning that they need to be covered for any accidents which could result in either themselves or their client being injured. Making sure that you are covered in case you are unable to work, for any ongoing treatment you may need or in case someone else is injured in the course of your work is generally recommended.
Some specialist insurers will have policies which suit any specific requirements you may have, so you should be able to find a suitable policy for your needs. You should keep the details of your policy somewhere safe anyway, but these documents will also come in handy if you need to prove your expenses at any point.
A percentage of the annual phone bill can be claimed as an allowable expense based on business usage.
For example, if your total phone bill for the year is £480 and 70% of the phones usage was for business purposes then you can claim an expense of £336 (£480 x 70%) for the tax year.
Working from Home.
If you do operate your business from home or even if you just spend time at home on admin or marketing this can be claimed as an expense.
If you average 25 to 50 hours working from home in a month then you can claim a flat rate of £10 per month, this increases to £18 per month for 51 to 100 hours per month and £26 per month for more than 100 hours per month.
Alternatively, you can calculate the working from home expense yourself by totalling your yearly bills (allowable bills include gas, electric, council tax, internet and mortgage interest or rent) divide that by the number of rooms in your property then divide that figure by seven (the number of days in the week) then times that figure by the average number of days spent working from home per week. This calculation is useful if you work at home for less than 25 hours per month.
To ensure your income and expense claims and calculations are correct it is advisable to use an accountant.
My fees for self assessment tax returns start from £80 per year, I can also provide advice on how to streamline your accounts, improve cash flow and grow your business.
In addition, Matrix Accountancy Services can act as your tax agent to speak to HMRC, receive all paperwork and file tax returns on your behalf, so you will never have to worry about contacting HMRC again.
For further advice and support you can read more blogs at - www.matrix-accounts.com/blog
Alternatively, contact me directly by email at firstname.lastname@example.org or call 07914 794744 and I will be happy to help.
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