Bookkeeping and accounting tips for hairdressers

As a self-employed hairdresser or salon owner, bookkeeping and accounting can be hard to manage amongst styling client’s hair and admin. However, sorting your money means you’ll have control over your finances, allowing you to make solid plans for the future.

In this guide, we’ll talk about:

• The difference between bookkeeping and accounting
• How to set up your business finances
• Accounting and bookkeeping methods for a self-employed hairdresser or salon owner
• Essential hairdresser accounting terms
• Key accounting documents you need
• What can hairdressers claim as an expense

Bookkeeping is the foundation of accounting. It involves tracking and recording your daily financial transactions, both incoming and outgoing. You then use this information when preparing your financial statements and tax returns, so it must be accurate.

Accounting then analyses your bookkeeping data to show you how your business is doing financially. In short, bookkeeping is your day-to-day and accounting looks at the bigger picture.

Starting right with your bookkeeping and accounting makes preparation for your taxes much easier in the long run. Accurately recording your transactions from the get-go will put you in the best place possible – future you will say thanks! Follow our steps below to set your business up for success.

When you’re self-employed, you must register with HMRC when your revenue goes over £1,000 during a tax year. The deadline to register your business is the 5th of October the year after you exceeded the £1,000 threshold.

You can set yourself up as a sole trader, limited company, or a partnership. It’s worth highlighting that limited companies and partnerships involve more admin and reporting, so you may need to hire an accountant if this is the route you take.

Having separate business and personal accounts makes managing your finances much more efficient. It means you won’t have to sort out which expenses are personal and business-related, which can get confusing quickly. 

Countingup is the perfect small business account for self-employed hairdressers and salon owners. You can manage your transactions in real time, pay suppliers on the go, and sort out your bookkeeping and accounting all in one app.

Once set up as a self-employed hairdresser, you need to keep up with your bookkeeping. It’s best to capture receipts and manage your transactions as you go – this way you can stay on top of your financial admin.

You can do this manually using a spreadsheet or through an app that will make the process faster and simpler. Countingup makes recording expenses easy with its receipt capture tool and automated expense categorisation. You can update on the go while the app logs your business transactions automatically. Try it for three months with no subscription fees here.

When using cash accounting, you only record income and expenses after you make a transaction. Cash accounting is simple, making it perfect for self-employed hairdressers.

With the accrual accounting method, you record expenses and income each time you make or receive a transaction, whether or not you’ve received cash for it yet. Accrual accounting is easy. It provides accurate information because you can record transactions as they happen.

The hybrid method combines the accrual and cash accounting methods. You can use the cash method to account for your business expenses and the accrual method to account for stock you hold for sale.

There are a few accounting terms you need to know. Knowing these terms will help you manage your bookkeeping and accounting as a self-employed hairdresser.

Revenue, income, and expenses

• Revenue: the total amount of money coming into your business. Income can come from:
  • Beauty services (such as haircutting or colouring)
  • Retail sales (from selling hairdressing products to your customers)
• Expenses: the total cost of running your business. These can be:
  • Chair fees
  • Materials and equipment
  • Marketing
  • Insurance
  • Training
  • Fuel (if you’re a mobile hairdresser)
• Income: the net amount of money your business makes after expenses.

• Assets: the resources that your business owns. Such as company vehicles or the salon space
• Liabilities: money your business owes, such as loans
• Equity: how much your company is worth after paying your expenses, liabilities, and taxes

• Payable: money you owe to other companies or individuals (outgoings)
• Receivable: the amount of money owed to your business (income)

You need to fill in some financial documents with HMRC to make sure your business is compliant. Documents include:

• Balance sheet: your business’ financial statement, including assets, liabilities, and equity
• Income statement (or profit-and-loss statement): the total revenue and expenses of your business over a given period
• Cash flow statement: a document that tells you how much money enters and leaves your business

Did you know? You can generate accounting documents automatically with Countingup. Get started for free.

As a self-employed hairdresser, you can claim back your expenses as tax relief.  We’ve listed the major expenses you can claim back from HMRC below.

As a hairdresser or beautician, having the right tools to cater for your client’s needs is essential. These are allowable expenses, for example:

• Scissors, brushes and clips
• Shampoo, conditioners and hair treatments
• Hairdryers, straighteners and curling tongs
• Colouring and hair dyes
• Gowns and protective clothing

You can claim back the purchase cost and the costs of repairing, replacing or upgrading the items too.

You can attend hairdressing or beauty training sessions or complete courses and claim the tax back as a business expense. Training is essential for you as a business owner as it means you can offer new treatments or expand into new markets to help grow your business. 

Hairdressers work with hazardous chemicals, sharp objects, and electrical equipment. Insurance protects you in case an accident happens to either yourself or your client. There are different insurance options – it’s worth looking into what would suit your business best. The options include: 

• Public liability insurance: if someone gets injured or their property gets damaged because of your beauty therapy business.
• Tools insurance: in case something happens to one of your tools.
• Stock insurance: if something happens to products you keep in stock.
• Personal accident insurance: in case you have an accident yourself.

Remember to keep your insurance documents in a safe place, in case you need them. You’ll also need to keep receipts to claim for the costs on your expenses. 

Some self-employed hairdressers rent a chair in a beauty salon to avoid having a salon at home. You can claim the cost of this back as an expense if this is you. 

But remember: chair rental agreements vary from salon to salon, so you should understand the terms and conditions before signing anything. Accurate records are essential because some salons take a percentage of your earnings.

If you travel to your clients, you can claim certain travel expenses on your tax return. Any expenses you incur via the list below are classed as an allowable expense. But you can only claim expenses on journeys wholly for work. Allowable travel expenses include:

• Public transport: travel by bus, train or plane
• Driving your own car: allowable expenses include fuel, insurance and repairs
• Being a passenger in another person’s car

If you mix personal and professional journeys, you must only claim the miles undertaken for work purposes. The easiest way is to record the business-related mileage as you complete the journey. 

You can claim for travel expenses on a per-mile basis, for which HMRC will let you claim:

• 45p per mile for the first 10,000 miles
• 25p per mile when you go over 10,000
• 24p per mile if you drive a motorcycle

If you wear a uniform while working, you can claim the cost as a business expense. You can also claim back the cost of any PPE or other protective items you need to do your job.

You can also claim back the cost of cleaning your uniform and other work items like towels and capes. Check how much you can claim on the HMRC website.

If you have WiFi or a mobile phone for work, you can claim the costs against your tax bill. However, you can only claim back the portion you used for business purposes. 

If you use your home WiFi and personal mobile phone for business, you must calculate how much you use those accurately.

If you operate your business from home, you can claim back utility costs relating to your business. For example:

• You have four rooms in the house and you use one for client appointments
• Your electricity bill for the year is £800 for the entire house, and each room uses an equal amount of electricity
• You can divide the bill by four to claim £200 as an allowable business expense

If you work from home at least 25 hours a month, you can use simplified expenses, a standard monthly rate calculated by HMRC.

If you’re a member of a professional society like the National Hairdressers’ Federation or an institute like the Hairdressing Council, you can include your membership costs as business expenses. But you can only claim if HMRC approves of the organisation.

You can claim costs for website hosting, domain name, registration, advertising, social media ads, website maintenance, and more. You can claim for any marketing costs to help reduce your tax bill. 

Some hairdressers will hire an accountant to handle their finances. If you’re looking for extra business support, sometimes accountants help clients develop a business plan to help their businesses grow. You can also include any accountancy fees incurred as a business expense. 

But with Countingup, you can manage your self-employed hairdresser bookkeeping and accounting with our small business account. It comes with built-in accounting software that will save you money on expensive accounting subscriptions later on down the line.

Countingup also automates the time-consuming aspects of financial admin, saving self-employed hairdressers like you, time wasted on boring tasks like bookkeeping. Sign up for a three-month trial with no subscription fees now.