How to prepare your tax return as a beauty salon owner

Being self-employed can be a joy when you get total creative freedom and can set your own hours, but it can be challenging when it is time to do your tax return. However difficult you find it, declaring your income to HMRC is important. Here are some tips to help you conquer your tax return and reduce your stress levels.

What are the taxes you should be aware of?

The main two taxes that you will need to pay are income tax and make National Insurance contributions.

When it comes to income tax, you do have a personal allowance, allowing you to earn a certain amount of money without paying tax. For 2022-2023 it is £12,750. However, if being self-employed is a side business and you have a higher-paying job, make sure your personal allowance is assigned to that.

National Insurance contributions are set at two different levels. Class 2 is the standard contribution, but if your profits are over £11,909 a year then you will have to pay Class 4 contributions as well.

What documents will you need?

HMRC requires you to keep good records for your business as they can request evidence of your income and expenses up to 22 months after you pay a tax bill. There are many ways you can do this. A popular choice is using an online platform where you can upload your receipts.

You will need to keep records of any income and costs related to your business. If you can make deductions via expenses, you must keep a record of these as well. A top tip to keep on top of it is to make it a daily or weekly habit. That way there isn’t a pile of paperwork to sort through when it gets closer to the deadline.

What can you expense?

In short, you can expense any costs related to your business as long as you can prove it. These can include any products and tools you use or upgrade in the course of business such as nail varnishes or shampoos and conditioners. It can also include products that you sell to customers like tan accelerators or hair treatment serums.

Other things that can be expensed are the costs of running a salon. This can include things like chair fees if you are renting a space or travel costs if you are mobile and travelling between clients’ houses.

If you work from home and use heating and electricity for your business, you can calculate the proportion of your bill that is for business use and expense that too.

Where can you pay your taxes?

There are a few ways to pay with the most direct route being through HMRC themselves. Once you have submitted your tax return you can view and pay your balance in your Government Gateway account. Alternatively, you can hire an accountant to do it for you.