A Beauty Professional’s Guide to Self Assessment Taxes

Managing your Self Assessment tax obligations is crucial to ensure financial stability and compliance with HM Revenue and Customs (HMRC). As a self-employed beauty professional, you're responsible for reporting your income and expenses to HMRC through the Self Assessment system. This process determines your Income Tax and National Insurance contributions. Failing to comply can result in penalties, so it's essential to understand and fulfil your obligations.

Key Steps to Stay on Top of Your Taxes

1. Register for Self Assessment: If you're newly self-employed, register with HMRC as soon as your income exceeds the £1,000 trading allowance. This registration will provide you with a Unique Taxpayer Reference (UTR) necessary for filing your tax return.

2. Maintain Accurate Records: Keep detailed records of all income and business-related expenses. This includes invoices, receipts, and bank statements. Accurate record-keeping not only simplifies the tax return process but also ensures you can substantiate your claims if questioned.

3. Understand Allowable Expenses: Familiarise yourself with expenses you can deduct from your taxable income, such as:

   • Supplies and Equipment: Costs of beauty products, tools, and equipment used in your services.

   • Travel Expenses: If you offer mobile services, you can claim for fuel, vehicle maintenance, and public transport costs related to your business.

   • Premises Costs: If you rent a chair or space in a salon, these costs are deductible.

   • Training and Development: Expenses for courses that enhance your skills and are directly related to your current business.

4. Be Aware of Important Deadlines: The tax year runs from 6 April to 5 April. Key deadlines include:

   • 5 October: Register for Self Assessment if you're newly self-employed.

   • 31 January: Submit your online tax return and pay any tax owed for the previous tax year.

   • 31 July: Make your second payment on account, if applicable.

5. Plan for Tax Payments: Set aside a portion of your income regularly to cover your tax liabilities. This practice prevents financial strain when payments are due. Consider opening a separate savings account specifically for tax savings.

6. Utilise Digital Tools: HMRC's Making Tax Digital initiative requires most self-employed individuals to maintain digital records and file tax returns electronically. Invest in compatible accounting software to streamline this process and ensure compliance.

7. Seek Professional Advice: Engaging a qualified accountant can provide valuable guidance tailored to your specific circumstances, ensuring all allowable expenses are claimed and your tax return is accurate. While not mandatory, professional advice can save you time and potentially reduce your tax liability.

Common Pitfalls to Avoid

• Missing Deadlines: Late submissions can result in penalties starting at £100, increasing with further delays. Mark key dates in your calendar and set reminders to ensure timely compliance.

• Inaccurate Reporting: Overestimating expenses or underreporting income can trigger HMRC investigations. Ensure all information provided is accurate and supported by documentation.

• Neglecting National Insurance Contributions: In addition to Income Tax, Class 2 and Class 4 National Insurance contributions may be due. Ensure these are calculated and paid appropriately to maintain your entitlement to state benefits.