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Contents
In this article we discuss:
Introduction
When Do I Need to Tell HMRC I Am Self Employed?
How Do I Register as Self Employed With HMRC?
What If I Have Made A Loss?
When Do I Need to File A Self Assessment Tax Return and Pay Tax?
What Income Do I Pay Tax On?
What Business Expenses Can I Claim When I’m A Self Employed Hairdresser?
What Are the 22/23 Tax Thresholds and Rates for Self Employed?
What Records Do I Need to Keep?
How Can I Keep My Accounts & Business Finances Organised?
Further Information
Introduction
This tax guide aims to give self employed hairdressers a better understanding of the tax requirements side of their business, which many self employed hairdressers may struggle with.
We cover when you need to tell HMRC you are self employed, how to register as a self employed hairdresser, self assessment taxes, and completing your annual tax return.
This guide is for sole traders, and doesn’t cover Limited Companies, where different rules apply.
Working for yourself has so many benefits. Taxes can be a factor that put many people off.
Simple Taxes are here to change that. Specialising in taxes and self assessment tax returns for the self employed, let your personal accountant worry about the tax requirements side of your business for you. We will offer advice and keep you tax efficient.
While using a professional accountant isn’t a legal requirement, it can be extremely beneficial. They will ensure you remain compliant with HMRC legislation when it comes to your tax affairs. They should also be able to save you tax, saving you money in the long run.
When Do I Need to Tell HMRC I Am Self Employed?
When your gross income (before expenses are deducted) goes over the £1,000 trading allowance in a tax year (6th April to 5th April), you will need to inform HMRC you are self employed.
Once the tax year ends on 5th April that you exceed £1,000, you will need to inform HMRC by 5th October.
How Do I Register as Self Employed With HMRC?
This can be done online through the HMRC website. Or Simple Taxes can do this for you.
What If I Have Made A Loss?
If you make a loss in the tax year, you must still declare your self employment figures to HMRC.
The loss can be carried forward and offset against future self employment profits.
Or alternatively, if you have employment income, the self employment loss can be set off sideways against your employment income, which may result in a tax rebate.
When Do I Need to File A Self Assessment Tax Return and Pay Tax?
The tax year ends on 5th April each year. You then have until 31st January the following tax year to file your tax return and pay any tax due on any profits after expenses are deducted.
If your tax liability exceeds £1,000 you will be required by HM Revenue & Customs to make payments on account towards the following tax year. The exact amount of payments on account are due on 31st January and 31st July.
What Income Do I Pay Tax On?
You will pay tax and National Insurance on your self employment profits. This is your total income in the tax year, less any business related expenses.
What Business Expenses Can I Claim When I’m A Self Employed Hairdresser?
Below is a list of business expenses that many self employed hairdressers can claim:
Chair fees or salon rent
Products (shampoo, hairspray, hair dye, hair extensions, brushes, clips, etc)
Styling equipment (electrical equipment such as hair straighteners, chairs, hair dryers, towels, etc)
Advertising expenses (website, web hosting, business cards, etc)
Bank charges, card machine charges
Laptops, ipad, phone
Licences & subscriptions
Software expenses
Uniform, protective clothing expenses
Trade magazines
Training costs and courses expenses
Business insurance
Domain name registration
Use of home as office
Total mileage for business travel if you are a mobile hairdresser using your own car for visiting clients
Travel expenses, ie parking, tolls
Public transport costs fpr visting clients
Printing, postage and stationery expenses
Legal fees
Accountancy fees
Telephone expenses (business % only)
Sundry expenses (customer magazines, refreshments, etc)
Professional expenses
Professional body subscriptions such as the national hairdressers federation
Other costs which are classed as a business expense for business purposes
What Are the 22/23 Tax Thresholds and Rates for Self Employed?
Income tax is payable at 20% for profits over the £12,570 tax free personal allowance. This increases to 40% for any income over £50,270
Class 2 NI is a set weekly amount of £3.15 when your profits exceed £6725
Class 4 NI is 9.73% of any profits over £11,909
Sound complicated? Don’t worry! When you complete your tax return online HMRC automatically calculates any tax due for you. Or you can use the service of a qualified accountant such as Simple Taxes who will be able to offer professional advice specific to your current situation. You can claim any accountant fees as an expense!
What Records Do I Need to Keep?
When you are self employed you are legally required to keep all of your business records (bank statements, sales invoices, purchase and expenses invoices), for 6 years plus the current tax year.
This is incase HMRC ever ask you for proof of your figures. They can issue penalties if the required documents not available.
How Can I Keep My Accounts & Business Finances Organised?
Here are a few tips for keeping accurate records and keeping on top of your business accounts and finances:
Open a business bank account – this keeps all of your business income and expenditure in one place, separate to your personal income, making completing your year end tax return 100x easier.
Use accounting software such as Quickbooks – keep on top of your bookkeeping so you can see how your business is performing. Need help with bookkeeping and setting up Quickbooks? Simple Taxes can help.
Keep all your receipts and bank statements in one place – either by cloud storage like Google Drive, Quickbooks, or in a box.
Further Information
For further information on self employment, please read the HMRC guidance here.
If you need help with your taxes get in touch with us today at www.simpletaxes.co.uk .
Disclaimer
The information contained in this blog is for general information purposes only, and not for accounting and tax advice. You should speak to a qualified professional about your specific circumstances before acting upon any of the information in this blog.
Date Published: March 2023
