In the hair & beauty business? Here’s how not to get a huge unexpected tax bill because of IR35
If you’re a self-employed hairdresser, barber, or beauty therapist renting a chair or room in a salon, then make sure you are acting like a business owner, otherwise, you could be financially penalised for “disguised employment” and end up with a hefty tax bill. Here, we explain how to avoid falling into employee territory, even if you think you’re doing everything right.
What is IR35?
The UK’s tax authority, the HMRC (His Majesty’s Revenue and Customs), has rules about employment status, known as IR35. It’s about ensuring that if you’re operating as self-employed, your working arrangements genuinely reflect that, rather than looking like you’re an employee.
IR35, or the “off-payroll working rules,” aims to prevent what’s called “disguised employment.” This is where someone might be set up as self-employed for tax purposes, but in reality, their day-to-day operations closely resemble those of an employee.
But you may be thinking, I handle my own taxes, I buy my own equipment and supplies and pay rent to the salon. Surely, I am self-employed. But does the salon dictate which hours you work? Do customers pay the salon or you directly? Do customers book appointments through the salon’s online system or do you have your own? Do you promote your services or does the salon? Those examples coud give the tax man enough ammunition to claim you are acting like an employee with the salon having a certain amount of control over how you run your business. That means insead of corporation tax, you wil now owe PAYE back taxes. The salon will also owe national insurance back taxes, too.
But guess what? HMRC won’t be helping you claim back any benefits you would have been owed as an employee, such as holiday and sick pay, pension conributions or any other type of employee perk.
Government guide on hair and beauty sector
The government has actually published specific guidance for the hair and beauty sector to help clarify this. It’s all about making sure everyone pays the correct tax based on their true working relationship.
HMRC provides a tool called “Check Employment Status for Tax” (CEST) which can be used by both you and the salon owner. HMRC typically stands by the results of this tool regarding your employment status for tax purposes. It’s a useful resource for getting an initial indication, but the ultimate assessment is based on the reality of your working arrangements, not just formal agreements.
Below we highlight ways to help ensure you are operating as self-employed and not an employee.
Actions you can take to be truly self-employed
For those of you renting space in a salon, the line can sometimes feel a bit blurry. Let’s clarify what defines true self-employment in this context.
To not be classified as a disguised employee, you must consistently demonstrate your autonomy and control over your business. The more clearly you operate as an independent professional, the less likely you are to get in hot water with HMRC.
Control your schedule:
- Set your own hours: A significant indicator of self-employment is deciding your own working hours and days. The salon shouldn’t dictate your shifts or schedule.
- Have your own set of salon keys: If you are renting a space, you should have a key to the premises so you have the option to offer your clients early morning and evening slots
- Manage your time off: You should be able to choose when to take holidays or breaks without requiring approval from the salon owner.
Own your client relationships
Generate your own client base: While the salon might offer referrals (for which you might pay a commission), a strong sign of self-employment is that you actively acquire and maintain your own client list
Handle your own bookings: You should manage your own appointment system, whether it’s an online platform, a dedicated app, or a physical diary. If you promote your services on social media or a standalone website let it be crystal clear for customers to contact you through your business or personal phone number and email. Also make it known that you carry out your hair and beauty services out of you space at the salon; you are not an employee of theirs so all bookings with you should go through you. This way if you offer at-home services, too, you are covered
Direct client payments: Ideally, clients pay you directly for your services. If payments go through the salon’s system, ensure there’s a clear, transparent agreement for how your share is processed and paid to you
Manage your business operations:
Supply your own tools and products: Generally, self-employed professionals purchase their own supplies, equipment, and products. If the salon provides everything, it starts to look more like an employment scenario. If you like the products they use, just make sure you pay for them.
Choose your own products and methods: You should have the freedom to decide which brands, products, and techniques you use for your services.
Set your own prices: This is a major factor. You must have the autonomy to determine your service prices. If the salon dictates your pricing, it’s a strong indicator of employment.
Control your working methods: You dictate how you perform your services and manage your daily tasks, without direct supervision from the salon owner on the method of your work.
Make your business legal:
Register for self-assessment: This is a fundamental step for all self-employed individuals in the UK. You’ll declare your income and expenses to HMRC via annual Self-Assessment tax returns and Corporation Tax filings if you choose to run as a limited company.
Maintain thorough records: Keep meticulous records of all your income, business expenses, and client details. Make these digital to be compliant with HMRC’s upcoming call for digital records (Making Tax Digital)
Secure your own insurance: It is highly advisable to have your own public liability and treatment risk insurance, even if the salon has its own. This demonstrates your individual responsibility
Formalise your arrangement: Have a clear, written agreement with the salon owner that explicitly outlines your self-employed status, the terms of your space rental, and reflects your actual working practices
Earn based on your work: Your income should directly correlate with the services you provide and the clients you serve. If you receive a fixed hourly or weekly payment from the salon regardless of your client load, this strongly suggests employment
VAT registration (if applicable): If your business turnover exceeds the VAT threshold (currently £90,000 as of 2024/25), you will be responsible for registering for and managing your own VAT
Promoting your services while renting a salon space
Being self-employed in a salon means you have the perfect base to grow your personal brand and client list. It lso shows customers and the tax man that you are promoting your service,s not those of the salon. Here are practical ways to promote your services:
Social media
Dedicated profiles: Create and actively manage your own Instagram, Facebook, TikTok, or other relevant social media profiles for your services. Do not post via the salon’s accounts. If you happened to handle their social media, then you shoud be paid separately by the salon to do this and have it wrien in a contract
Showcase your work: Post high-quality photos and videos of your hair, beauty, or barbering work. Use relevant hashtags and tag the salon’s location (with their permission, of course) to attract local clients
Behind-the-scenes: Share glimpses of your tools, products, and process to build a connection with your audience and encourage new appointments
Client testimonials: Share positive reviews and testimonials from your satisfied clients
Run your own ads/promotions: You can run targeted social media ads for your specific services and deals.
Personalised branding & materials:
Business cards: Design and print your own professional business cards or promo gifts with your name or business name, services, contact details, and social media handles. Leave them at the salon’s reception or give them directly to clients
Service menu/price list: Create your own menu of services and prices. This clearly communicates what you offer and your independent pricing structure
Online booking system: Invest in an online booking system that clients can use to book directly with you. This reinforces your control over your appointments.
Personalised uniform/apron: If you wear a uniform, consider customising it with your own personal branding or logo.
In-salon promotion (with agreement from the salon owner):
Display your work: If permitted, have a small display of your portfolio or ‘before & after’ photos at your station.
Client referral scheme: Create your own referral scheme for existing clients who send new business your way.
Cross-promotion with other renters: If other self-employed professionals work in the salon, explore opportunities to cross-promote each other’s services (e.g., a hairdresser recommending the beauty therapist, and vice-versa).
Small signage: With permission, place a small, professional sign at your station or within the salon that clearly states your name and services.
Networking & offline presence:
Local community groups: Join local community Facebook groups or attend local events to network and subtly promote your services.
Collaborate locally: Partner with other local businesses (e.g., boutiques, cafes) for mutual promotion or special offers.
Word-of-mouth: Happy clients are your best advertisement
Think of the salon as your business’ landlord – that’s it
Being a self-employed professional renting space in a salon is a popular business model. The key to staying clear of IR35 issues is to genuinely operate as an independent business. This means having control over your hours, clients, pricing, payments and business operations. Think of the salon as your landlord, and you handle all the rest.
By promoting your own services and taking on the full responsibilities of a business owner, you strengthen your position as self-employed. If you have any complex questions or unique circumstances, consulting with an accountant or tax advisor who specialises in self-employment is always a wise step.