VAT for UK Salons: Threshold, Flat Rate Scheme, Vouchers and Chair Rent

If your salon is nearing £90,000 a year, VAT is the biggest change to your prices you are likely to make. This guide covers when you must register, what carries VAT, whether the Flat Rate Scheme pays, and how vouchers, courses, deposits and chair rent are treated.

The rules are as they stood on 3 November 2026. This is not tax advice: confirm anything that affects your registration or returns with your accountant or HMRC.

#When does a UK salon have to register for VAT?

You must register when your VAT taxable turnover for the previous 12 months goes over £90,000, or when you expect it to go over £90,000 in the next 30 days alone. The registration threshold has been £90,000 since 1 April 2024, and the deregistration threshold £88,000.

The 12 months roll: at the end of every month, add up the last 12 months of taxable sales, whatever your tax year. Taxable turnover is everything you sell that isn't exempt. For a salon that means services, retail products, gift vouchers taxed when sold and chair rent you charge hairdressers.

Two more rules matter:

• Registering late doesn't save the VAT. You must pay VAT on sales made since the date you should have registered, and you may owe a penalty. That is a sixth of those takings, money you never collected from clients.
• A one-off spike can be excused. If you went over temporarily, you can apply for an exception. VAT Notice 700/1 says you must show HMRC your taxable supplies won't go over £88,000 in the next 12 months, and HMRC decides.

Should a salon register voluntarily?

Usually not. Your clients are consumers who can't reclaim VAT, so registering early adds 20% to their bills or takes a sixth of your takings, in return for reclaiming VAT on your costs.

A fit-out isn't, on its own, a reason to register early. Once registered, you can reclaim VAT on goods bought up to four years before registration if you still have them, and on services bought up to six months before, if they were for the business now registered.

#What VAT rate applies to salon services and products?

The standard rate, 20%, applies to almost everything a salon sells: cuts and colour, nails, brows and lashes, waxing, massage, facials and retail products. Because services and retail carry the same rate, most salon bills have one rate on every line.

Medical treatment by a registered health professional can be exempt, but VAT Notice 701/57 says services carried out purely for cosmetic reasons are standard-rated. An aesthetics room should charge 20% unless an accountant confirms otherwise for a specific treatment.

How should you set prices once you're registered?

Work out the price you need before VAT, then add 20% for the menu. How to price salon services explains the method. Pay stylists' commission on the price before VAT too, since the VAT is HMRC's money; salon commission structures shows how.

To find the VAT inside a VAT-inclusive price, divide by six: £108 includes £18 of VAT. You don't have to issue VAT invoices for retail sales to consumers. If a VAT-registered business client asks for one, a simplified invoice is allowed when the sale is £250 or less including VAT.

#Should a salon use the VAT Flat Rate Scheme?

Sometimes. The scheme suits a salon with low VAT-bearing costs that expects taxable turnover of £150,000 or less (excluding VAT) in the next year, the limit for joining. You still charge clients 20%, but pay HMRC a fixed percentage of your VAT-inclusive turnover. For "hairdressing or other beauty treatment services", it is 13%.

• No VAT back on purchases, except a single capital purchase of £2,000 or more including VAT, claimed outside the scheme.
• Limited cost businesses pay 16.5%. That is any VAT period in which your spend on relevant goods, including VAT, is under 2% of VAT-inclusive turnover, or over 2% but under £1,000 a year. Services, capital items and food for you or your staff don't count. A salon buying backbar and retail stock usually clears the test; one that mainly rents out chairs may not.
• First-year discount. In the first 12 months of VAT registration the rate is 1% lower: 12% for salons.
• You must leave at your anniversary if total income for the year exceeded £230,000, or when you expect it to exceed £230,000 in the next 30 days alone.

The comparison is simple. At 13%, the scheme costs 15.6% of your sales before VAT. Standard accounting costs 20% of sales minus the VAT you reclaim on costs. So the scheme is cheaper when your costs that carry 20% VAT, measured before VAT, are under about 22% of your sales before VAT.

#How is VAT charged on gift vouchers, courses and deposits?

A gift voucher for your own salon is usually taxed when you sell it. A prepaid course is taxed when the client pays. A deposit is taxed when you receive it, and the VAT stays due if you keep it.

Gift vouchers

Since 1 January 2019, UK law has two kinds of voucher. A single-purpose voucher is one where the VAT liability and place of supply are known when it is issued; VAT is due when it is sold. A multi-purpose voucher is any other voucher; VAT is due only when it is redeemed.

A voucher spendable only at your salon, in the UK, on services and products that are all standard-rated is normally single-purpose. VAT goes in the return for the period you sell it, nothing more is due on redemption except on any extra the client pays, and if it is never used HMRC says no VAT adjustment can be made unless you refund it. A voucher that could buy something with a different VAT treatment, such as an exempt health treatment, is multi-purpose. Money-off coupons aren't vouchers at all; they are discounts.

Courses, packages and deposits

A course paid for upfront, such as six laser sessions, is an advance payment. The tax point is the date you receive the payment or issue a VAT invoice for it, whichever comes first. Six sessions sold for £540 in March put £90 of VAT in the return covering March, and later sessions carry no further VAT.

If the client stops halfway and you keep the money, the VAT stays due: VAT Notice 700 says VAT is due on payments you keep for services the customer doesn't take up. If you refund part of a course, ask your accountant to adjust the VAT. Deposits work the same way. VAT is due when you receive one, and HMRC's guidance on forfeit deposits says it remains due if you keep the money after a no-show. Designing courses is covered in salon membership programmes, and deposits in the salon no-show policy guide.

#How does VAT work on chair rental?

Chair rent charged to self-employed hairdressers is standard-rated. HMRC treated it as a standard-rated supply of facilities for years, and a change in the law from 1 October 2012 made charging VAT on it a legal requirement. If you are VAT-registered, add 20% to the rent; if you aren't, the rent counts towards your £90,000.

HMRC's manual describes chair rentals as a chair, or a defined area such as a room, provided to hairdressers or barbers with services such as reception, booking and laundering towels. Rooms let to beauty therapists are less clear-cut. In Errol Willy Salons (2022), the First-tier Tribunal held that letting essentially bare rooms to self-employed beauticians was an exempt licence to occupy land. A tribunal decision doesn't bind other cases, so take advice before treating a room let as exempt.

Rent moves turnover off your books only if the clients are theirs

Chair rental keeps a stylist's takings out of your turnover only if the stylist supplies the clients directly. HMRC asks in order: are the stylists your employees; if not, do they supply the salon or the clients; and only then, what does the salon supply to them. If they are employees, or supply the salon, the salon is supplying the clients and VAT is due on their full takings.

HMRC tests the written agreement against guidelines agreed with the National Hairdressers' Federation, then checks the salon works that way. Clients should contract with the stylist and know it; the stylist sets their own prices and hours and keeps their own appointments and records; and money from their clients is theirs, even when your desk takes it.

Each self-employed stylist has their own £90,000 threshold. Whether they are genuinely self-employed is a separate question, covered in chair rental vs employing stylists.

#What records does a VAT-registered salon need?

Every VAT-registered business, including one registered voluntarily, has had to follow Making Tax Digital for VAT for VAT periods starting on or after 1 April 2022. You keep VAT records in compatible software and submit returns through it. Figures moving between programs must travel by digital link, and HMRC says copy and paste doesn't count. Keep business records for at least six years.

Late returns earn penalty points for VAT periods beginning on or after 1 January 2023. A quarterly filer who reaches four points pays a £200 penalty, and £200 more for each late return while there. Nil returns count.

#Does VAT work differently in Scotland, Wales or Northern Ireland?

Not for a salon's services. UK VAT rules for services apply across the whole UK. Northern Ireland follows EU VAT rules for goods under the Windsor Framework, which matters only if you buy or sell stock across the border with the EU; if you do, ask your accountant.