If you’re a self-employed hairdresser or beauty professional, a major change to the tax system is coming that could affect how you report your income to HMRC. We got the lowdown from Melanie Beech, founder of The Salon Expert Accountants, who specialises in working with hair and beauty businesses across the UK.
From April 2026, many self-employed people in the UK will move onto a new system called Making Tax Digital (MTD) for Income Tax. This only affects sole traders – not limited companies. So if you trade as a sole trader, things are about to change. Salon professionals should be aware that the £50,000 threshold is based on turnover, not profit.
From April 2026, Making Tax Digital will apply to sole traders and landlords with total turnover of over £50,000 per year. This includes income from freelance work, renting a chair, mobile services or any other self-employed work.
From April 2027, the rules will expand to include people taking over £30,000.
If your income is below these levels, you will not need to join yet, but most small businesses are expected to move to the new system eventually.
However, you don’t need to do anything yet, as HMRC will automatically enrol you and send you a letter to let you know.
What is changing?
Under the current system, most sole traders complete one Self Assessment tax return each year. Making Tax Digital changes how often you report your income and expenses to HMRC.
Under MTD you will need to:
- Report your income and expenses to HMRC quarterly
• Use HMRC-approved accounting software
• Keep digital records of your income and expenses
• Still complete a final end-of-year declaration to confirm the figures
Although you will be reporting more frequently, the payment deadlines are not changing.
Tax will still normally be due in January and July after the end of the tax year, just like it is now.
Why is HMRC introducing this?
The aim is to modernise the tax system and give HMRC a clearer picture of how much tax businesses are likely to owe throughout the year. They also hope that by encouraging businesses to keep digital records and update their accounts regularly, there will be fewer accounting errors.
One positive is that the software will usually show an estimate of the tax you should have saved as you go along, which can help avoid surprises when the bill arrives.
How can salon professionals prepare?
- – Open a separate business bank account if you don’t already have one
• Sign up for accountancy software
• Allow for the cost of accounting software
• Budget for slightly higher accountancy fees due to the additional reporting
Having a separate business bank account is particularly important. If personal and business spending are mixed together, it creates more work for you or for your bookkeeper, which can lead to higher fees.
There will also be penalties if deadlines are missed. HMRC has said it will be more lenient in the first year while businesses get used to the system, but fines will still apply if reporting is consistently late.
If you find it difficult to keep on top of the bookkeeping, it may be worth asking a professional for help.
At The Salon Expert Accountants, we have Making Tax Digital packages designed specifically for hair and beauty professionals starting from £35 per month.
Preparing early will make the transition much smoother. Getting organised now, using the right software and keeping your business finances separate will make quarterly reporting far easier.
With the right systems in place, Making Tax Digital doesn’t have to be something to worry about. In fact, it can help salon owners stay more in control of their finances and avoid unexpected tax bills.
www.salonexpertaccountants.co.uk
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