Comprehensive Guide to VAT for Hair and Beauty Salons, and Aesthetic Clinics

Comprehensive Guide to VAT for Hair and beauty salons, and Aesthetic clinics

In this blog post, we will delve into the world of Value Added Tax (VAT) and its implications for salon and clinic owners. VAT can have both positive and negative effects on your business, and understanding its benefits, drawbacks, and registration process is crucial. We will also provide you with essential tips to simplify your VAT journey. Let’s dive in!

If you prefer to watch our content, you can find a comprehensive video about VAT on our YouTube channel or scroll down to watch it right away.

Benefits of Being VAT Registered: When your salon reaches the VAT threshold, it signifies that your business is thriving. VAT registration offers several advantages, such as:

  1. VAT reclaims: As a VAT-registered business, you can claim back the VAT paid on your purchases, making products and certain services more cost-effective for you.
  2. Increased growth potential: Breaking the £85,000 turnover threshold liberates your business from any limitations. You can grow your salon or clinic without being restricted by the previous ceiling of £85000, opening up numerous opportunities.

Drawbacks of VAT Registration

While VAT registration can be advantageous, it’s important to be aware of the potential downsides, including:

  1. Increased costs for clients: VAT registration makes your services 20% more expensive for clients. This factor should be considered when setting your pricing to minimize the impact on your clients.
  2. Cash management challenges: Salon and clinic owners must set aside sufficient funds each month to cover quarterly VAT bills.  Good planning and record-keeping are crucial to avoid any cash flow issues.  We send our VAT clients, reports each month so you know how much to put aside for your quarterly VAT return.  This is crucial to succeed in being VAT registered.

Registration Threshold and Timing

Salons must register for VAT once their turnover exceeds £85,000 in any consecutive 12-month period. It is essential to monitor your turnover regularly to anticipate when you will hit this threshold, as it is based on a rolling 12-month period rather than a specific calendar or financial year.

If you employ self-employed stylists or therapists, make sure you check with your accountant because there are specific rules regarding whether to include their income in your turnover or not.

Top Tips for a Smooth VAT Journey

Here are our top tips to make your VAT journey easier:

1. Keep up-to-date bookkeeping records

Regularly update your accounts or hire a professional, like us to ensure you stay informed about your VAT threshold, quarterly payments, and accurate returns. Monthly bookkeeping can help avoid any surprises when VAT returns are due.  We send our VAT clients, reports each month so you know how much to put aside for your quarterly VAT return.  This is crucial to succeed in being VAT registered.

2. Plan pricing adjustments

Since VAT registration increases your costs, carefully plan your pricing strategy. You can increase prices incrementally and absorb the additional expenses for a specific period. Alternatively, you can increase your prices by 20% immediately.  Collaborating with an accountant early can help you make better decisions around your pricing.  With new salons and clinics, I quite often recommend they charge VAT from opening to save having to raise prices significantly later.  This depends on their anticipated turnover so do get in touch if you are opening a new salon or clinic and would like advice.

3. Maintain a dedicated business bank account

Using a separate bank account for all your salon/clinic transactions simplifies bookkeeping and helps you keep track of payments accurately, preventing any overlooked expenses.

4. Use salon software with integrated payment systems

Utilising salon software with linked card payment machines allows for precise payment tracking and comprehensive record-keeping. This system ensures you maintain accurate records, especially for cash transactions which is where many people slip up.

5. Request VAT receipts for business expenses

When purchasing items for your salon/clinic, always request VAT receipts. Electronically uploading these receipts to your accounting software enables you to claim back VAT on all eligible purchases.

6. Choose a specialist accountant

Selecting an accountant well-versed in the hair and beauty industry is essential. Their industry-specific knowledge will provide valuable advice, saving you time and money in the long run.


Understanding VAT registration and its implications is crucial for salon and clinic owners. While being VAT registered can bring financial benefits, it’s important to carefully consider the impact on pricing and cash flow. By implementing our top tips and seeking professional advice, you can navigate your VAT journey smoothly. If you require assistance with your VAT returns, please feel free to contact us through our website or social media channels. We’re here to help you succeed in managing your salon’s VAT obligations.

If you require further assistance in managing your business finances or seeking a more reliable accountant, reach out to us, here at the Salon Expert Accountants by booking a discovery call.  Take control of your cash flow and set your business on a path to financial stability.