REGISTERING FOR VAT

We spoke to financial experts to understand the steps to take once you hit the VAT threshold and the recently announced changes

Value Added Tax (VAT) is the tax that all businesses must pay when their turnover is higher than £90,000. It is added to the price of most goods and services you buy, but for salons the associated 20% increase in costs can be difficult to pass on to clients.

What's New For 2024?

"Although VAT rates haven’t been affected as of yet, in March 2024 the UK government announced that you must now register for VAT if your taxable turnover exceeds £90,000, instead of £85,000," explains Melanie Beech, director of The Salon Expert Accountants. “The taxable turnover for VAT deregistration has increased to £88,000; if your turnover is below this amount, then you can cancel your VAT registration.” This £5,000 increase in the VAT threshold has not made a big difference to most businesses and the registration and deregistration rules have remained the same.

When Should I Register?

It’s important to keep an eye on your turnover so you can register for VAT in plenty of time if you get close to the threshold. "You can incur penalties if you fail to register, so keeping accurate records is a priority,” explains Paul Pritchard, director of Abacus Accountancy. “Once registered, you must report to HMRC the amount of VAT you’ve been charged and the amount you’ve paid. This is done through your VAT return which is usually due every three months." Melanie adds: "You need to be aware that the £90,000 threshold is for any rolling 12-month period.” As soon as that cumulative 12-month turnover exceeds £90,000, you must register.

What Happens If I Am Late With My VAT Return?

In 2023, the way HMRC applies penalties for late VAT returns was changed. "You now face penalty points if you submit your VAT return late, this includes nil VAT and repayment returns as well," says Melanie. Late VAT submission penalties work on a points-based system, so for each return you submit late you will receive a penalty point. "When you hit the points threshold in any 12-month period you’ll receive a £200 penalty, and a further £200 late VAT payment penalty for each subsequent late submission while you remain at the threshold," she adds.

Reclaim VAT Expenses

Businesses can reclaim VAT on taxdeductible expenses used specifically for their business, for example IT equipment and stationery. "But unlike retail businesses, which buy and sell stock and offset the VAT they pay, a salon’s main costs are wages and labour,” Paul explains. “This means the VAT salons pay pretty much comes straight off their profit margins." Check with your accountant if you can write off anything against your income when completing your tax return.

Should You Raise Prices?

Because wages, labour, energy bills, rent and equipment are all relatively fixed costs, when a tax like VAT goes up it is difficult for salons to make savings elsewhere or to pass this increase on to customers. “You could raise prices incrementally before exceeding the threshold so that it’s not such a shock when you do have to register," says Paul. There are also schemes such as the Flat Rate scheme, which may allow you to pay a flat rate of tax (currently 13% for salons) on your gross turnover rather than a fluctuating rate based on VAT.

HJ PRO SERIES

HAIR LOSS 101

In the second of our series on hair loss, we talk to Jon Walker, Wella’s Education Brand Manager about Nioxin ingredients

Whether your client is open about their hair loss, or whether they are coming to terms with it, there are ways of having a conversation around products that won’t offend or upset clients.

I like to bring Nioxin products to life by talking about them just like I would a skincare routine. People know that they should regularly cleanse, tone, exfoliate and moisturise the skin on their face, but why stop at the hairline? The scalp needs this care too! Did you know the scalp ages 12 times faster than skin on the face? I like to focus on the ingredients that clients will recognise from their skincare, like niacinamide, a form of vitamin B3 that helps nourish hair and saliclyic acid that helps remove dead skin cells and promote a healthier environment for hair growth.These can all be found in Nioxin products – and they all help to promote scalp health which in turn promotes healthy hair growth.

This month, I’m excited about Nioxin’s newest launch Anti-Hair Loss Shampoo, that includes Sandalore technology, which helps hair anchorage.The shampoo is part of a three-stage system, which is a great routine to recommend to clients who are experiencing thinning or hair loss.

Nioxin also provide Nioscope scalp cameras which allow you to take a close look at your client's scalp to see what active hair strands are growing and what follicles have stopped producing strands. Our consultation books are designed to help stylists understand and explain to clients what’s going on. Nioxin's range of products are about supporting clients on their hair health journey.

BOOK NOW!

Wella Studio Nioxin Experience & Enable 2-day course, featuring Kay McIntyre Edinburgh 21-22 Oct, London 14-15 Oct, Manchester 29-30 Oct

Contact your Wella Account Manager or scan the QR code for your studio contact or shop now at wellastore - uk.wella.professionalstore.com/nioxin