As a self-employed hairdresser, bookkeeping and accounting can easily become a hairy situation. However, sorting out your money the right way means you’ll have control over your finances, allowing you to make solid plans for future goals. 

In this guide, you’ll find:

Bookkeeping vs accounting

Bookkeeping is the foundation of accounting. It involves tracking and recording your daily financial transaction. You use this information when preparing your financial statements.

Accounting analyses your bookkeeping data to show you how your business is doing financially.

Setting up

Starting with the right foot is the only way to go when it comes to taxes. Follow the steps below to set your business up for success.

Register with HMRC

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

You can set yourself up as a sole trader, limited company, or a partnership.

Note: limited companies and partnerships involve more admin and reporting, so you may need to hire an accountant.

Open a business current account

Opening a business account will help you manage your finances more efficiently. You won’t have to sort out which expenses are personal and business-related, which can get confusing quickly.

Countingup is the perfect current account solution for self-employed hairdressers. You can manage your transactions in real-time, take card payments, and sort out your bookkeeping and accounting all in one app.

the current account for hairdressers. It does your books, so you don't have to. Get started.

Track all your income and expenses

Once you’re set up as a self-employed hairdresser, you must keep up to date with your bookkeeping. The best way is to make bookkeeping a habit and track how much you earn and spend each day. 

You can do this manually using a spreadsheet, or you can use an app that will make the process faster and simpler. Countingup makes recording expenses easy with its receipt capture tool. You can make updates on the go, while the app logs your business transactions automatically. Try it for free.

Accounting methods

Cash accounting

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

Accrual accounting

In this method, you record expenses and income any time a transaction happens, whether or not you’ve received cash for it. Accrual accounting provides accurate information since you can record transactions as they happen.

Hybrid accounting

The hybrid method combines the accrual and cash methods of accounting. You might use the cash method to account for your business expenses and the accrual method to account for inventory held for sale.

Accounting terms you need to know

There are a few terms you should know to 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. It 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.

Income = revenue – expenses

Assets, liabilities, and equity

  • 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.

Equity = assets – liabilities

Accounts payable and receivable

  • Payable: money you owe to other companies or individuals.
  • Receivable: the amount of money owed to your business.

Key accounting documents for hairdressers

There are also some financial documents that you need to fill in and send to HMRC. These 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.

What can hairdressers claim as expenses?

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

Materials and equipment

As a hairdresser or beautician, you know how important it is to have the right tools for the trade. For example:

  • Scissors
  • Shampoos
  • Hairdryers
  • Colouring and styling equipment

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

Training

You can attend training sessions or complete courses relevant to your business and claim the tax back as a business expense.

Insurance

Hairdressers work with hazardous chemicals, sharp objects, and electrical equipment. Having insurance will protect you in case an accident happens to either yourself or your client. Look into:

  • Public liability insuranceif 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.

Keep your insurance documents in a safe place in case you need them. These papers will also come in handy if you need to prove your expenses at any point.

Chair fees

Some self-employed hairdressers choose to rent a chair in a beauty salon. If this is you, then you can claim the cost back as a business expense. 

Remember: chair rental agreements vary from salon to salon, so make sure you understand the terms and conditions before signing anything. Some salons take a percentage of your earnings, so it’s vital to keep accurate records.

Travel expenses

If you travel to your clients, you can claim certain travel expenses on your tax return. There are many transport options on which you can claim expenses:

  • Public transport
  • Driving your own car
  • Being a passenger in another person’s car

However, you can only claim it if the journey is for work. 

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 on:

  • 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

Clothing and protective equipment

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 laundering your uniform and other work-related items like towels and capes. Check how much you can claim on the HMRC website.

Utilities

If you use your WiFi or 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 operate out of your own 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.

Professional expenses

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

Marketing or advertising

You can claim costs for website hosting, domain name, registration, ads, website maintenance, and more.

Accountancy fees

Many hairdressers hire an accountant to handle their finances and to co-develop a business plan that will help their businesses grow. You can include the accountancy fees as a business expense. 

With Countingup, you can apply for a business current account with free built-in accounting software online in minutes. It automates the time-consuming aspects of financial admin, saving thousands of UK business owners time and money.

the current account for hairdressers. It does your books, so you don't have to. Get started.