Salon Tax Panic? Do This Before the Deadline

The tax year end makes a lot of salon owners anxious, usually because they've left things too late, they don't know what they owe, or they're not sure what they should have done differently. Today, we're going to fix all three. Nine days is just enough time if you get started now. Hello, hello, hello my salon owner friends, Phil Jackson here, your queen of salons, coming all over the internet with another dose of my Wise Owl wisdom. How on earth are you? Achingly well, I hope, as we get towards the end of Q1. How's it been for you? Few people reaching out and let me know that it's been a bumpy ride. That's not news to me. That was kind of the vibe that I was getting. And I think that generally, I encourage people to look at their personal economy. So what's going on with you? What's going on with your clients? But I'm afraid there's too much going on in the world right now, and I think that is starting to have a bit of an impact. Certainly, people are starting to feel the pinch with increased fuel prices. There's a bit of uncertainty around, and that's not great. So just my advice is make sure your salon is the haven from all of that. Let's make sure that our lovely clients have got somewhere safe to go, where they can enjoy themselves, to relax, to feel special, and to enjoy their visit. So what are we talking about today? Well, we're talking about the tax year end here in the UK, which is on the 5th of April. And I need to head this episode by saying that this is not financial advice. If you think that you can get top quality financial advice from a free podcast, frankly, my darling, you are delusional, deluded, and kidding yourself. That's not what this podcast is all about. It's just to give you a few little pointers, maybe on some of the questions that you could be asking those qualified, indemnified experts. And we've talked about the wonderful relationship we have with gorgeous accountants in a recent episode. So take a look through the back catalogue. Also, head over to queenofsalons.com and have a look at my back catalogue. Not a euphemism. It's looking really good over on the website now. I've just got the show notes to fill in, but all of the episodes are there. We're on episode number 252. My goodness. It's been a long time since we started. So what are we talking about? We're talking about everything financial from this year. We're talking about income, expenses, allowances, pension contributions, but all of that resets on the 5th of April. So we've got a window of opportunity.

And where a lot of people go wrong is they don't think about tax until January, which is when the self-assessment deadline hits. But the decisions that affect that tax bill in January are made before 5th of April. By January, it's too late to change anything. So there are a few things that we can do and can only be done before 5th of April that are going to make a difference to your tax bill. First, I want to talk about pension contributions. I know you're all desperately young and going to stay eternally youthful, but you do need to look to your future. And certainly here in the UK, the certainty of a state pension is shaky. And the time that we can start drawing on that state pension seems to be pushed back and back and back and back. So we need to be planning our pension contributions. And I'm not here to give you advice on particular avenues as far as pensions are concerned. But you do have an allowance. You have an amount of money that you're allowed to put into your pension. And I want you to make sure that you're using that allowance properly. We also need to make sure that our business expenses are all recorded and allocated for this year. Now, this is the time to reach out to your accountant. A brief callback to an episode earlier in the month when we talked about that relationship. If you've not spoken to your accountant since January, this is the nudge. So let's jump in with your end of year checklist. I've got five practical things that you can do in the next nine days. Item number one, not very sexy, but we need to make sure that your income and your expenses figures are up to date. So you need to pull together all of your income for the year. Every payment method, card, cash, bank transfer and tips. If you're using salon software, it should be able to generate a revenue report easily. If not, then your bank statements are going to be your starting point. But that's not ideal. But as far as expenses are concerned, we're going to be going through bank statements, your credit card statements for the year. Anything that is genuinely a business expense, we need to make sure we're recording it. So not just things like your product costs, but also things like software subscriptions, any training that you've invested in, professional fees, your equipment, insurance, your phone, your home office, if that applies to you as well. And the one thing that people miss is that continuing education and training courses, those industry memberships, the trade magazine subscriptions, your business travel mileage, but talk to your accountant about that. So normally your mileage is not covered to and from your normal place of business.

But if you've been on a training course, you can certainly claim for the travel there. And don't forget your bank charges too. You can't claim what you cannot evidence. So you need to make sure that we're finding all of those lost receipts, go through your email, go through your email junk folder, find those digital confirmations of all the spend and your bank statement is really the minimum record. If this feels overwhelming, then don't do it all in one sitting would be my advice. Couple of hours this weekend, you can probably break the back of it and two hours, you'll certainly get all the big hitting stuff. Okay, there might be some stuff that slips through the cracks this year. But do you know what, if we can break the back of it, then we've got an accurate picture. And this is also the time to look at your systems. If you're struggling to get those figures together, have a look at why. Does it mean that we need to look at new software systems in the next year? Does it mean that we need to look for a bank where it's easier for us to get these figures? Maybe we need to make stuff a bit easier, but we'll talk about looking forward to next year later in the episode. Item number two, I've already alluded to, that's your pension contributions. Whether you're a sole trader or a company director, your pension contributions reduce the amount of taxable income for the year. So even a small contribution, just a few hundred quid, can make a difference to your tax bill if you're hovering around a tax threshold. If you haven't got a pension sorted yet, it's probably not the week to get one set up. But make a note, make it a priority for the new tax year. Your 2026 strategy document should have a pension in the long-term vision. This is how we start. If you do have a pension, talk to your accountant, talk to your financial advisor about whether a contribution before 5th April makes sense for your situation. Number three, I want you to check where you are against the VAT threshold. So if you're not registered for VAT, I want you to look at where you are in relation to that threshold. So currently it's 90K of taxable turnover on a rolling 12-month period. If you're getting close to that figure, or if a strong Q1 has pushed you closer than expected, you need to know your position now. Don't wait until you hit it. Because if you go over the threshold without registering, it is a problem.

HMRC will backdate your liability. And you're going to owe VAT on sales that you've already made without passing it on to clients. So there's going to be a shortfall. Trust me, take it from one who knows. This can be an expensive mistake to make. But the VAT topic, I think, needs a bit more space. So we're going to give it a full episode, all of its own. And that episode is coming next month in April. But for now, know your number. Pull your last 12 months of revenue. Check where you stand. I would say if you're within 10 to 15K of the threshold, it's time to speak to your accountant before the new tax year starts. If that means we need to start looking at pricing, if it means we need to start getting some things in place ready to go over the threshold, now's the time to start making those arrangements. After number four, make sure you're paying yourself properly. You limited company people are generally on top of this. But if you're a sole trader, technically, everything your business earns is your income. But that doesn't necessarily mean you've actually given yourself a decent salary. Lots of salon owners draw money as and when they need it without really formalizing their own pay. Before the tax year closes, make sure you've got a clear picture of what you've actually taken out of the business this year. That's your figure for income tax purposes. If you're a limited company director, we've got salary. We've also got dividends. And your accountant will make sure that we've got the split the right way. So usually they'll make a suggestion on either taking more in the way of salary, more in the way of dividends to make sure the balance is right tax efficiency wise. But you need to make sure the payments are all correctly recorded and that your payroll is up to date. If you took over payroll from your accountant earlier this year, this is the moment to double check that everything is correct. The goal for this year for the 2026 strategy is about 50k of personal income. Do you know whether you're on track for that? Tax year end is the moment to check. And item number five, I want you to talk to your accountant this week, not next week, not after the 5th of April, not after the Easter holidays, before the 5th of April. That's when that window closes and some of these opportunities are going to go away. And your accountant will be dealing with lots of clients who are scrambling. And I get that you may not feel like a priority to them, but you need to figure out whether you're going to miss anything before the tax year closes. Is there anything you should be doing with your pension and where you stand on VAT? If your accountant's not responsive or useful at the moment, well, this is the information you need.

And a good accountant earns their fee in the weeks around tax year end. But if you can't get hold of them now, take note. It might be something you need to look at in 2026. Usually, accountants will increase capacity. They'll take on extra staff, extra admin staff to help with this sort of thing at year end. And then part three is we need to be setting up the new tax year properly. So from the 6th of April, we've got a shiny new year. Start as you mean to go on. This is when we can make our financial New Year's resolutions. Make sure that we're keeping our separate finances for business expenses and personal expenses. If you've struggled to get those figures together, now's the time to look at your systems. Now's the time to look at your software. Make sure we've got a dedicated business bank account that we don't dip into. And the business bank account is the only place our expenses are paid from. Make sure we're getting into really good habits with recording expenses, taking photos of receipts as they happen, not in a panic. Every time we get to the next financial year end. You shouldn't need more than about 15 minutes a week as long as you're doing this consistently. It's also time to revisit your quarterly targets. Let's make sure that we've got a good target in place for Q2, for Q3 and Q4. You should have the plan. If you go back a couple of episodes, we put our plan together. We've talked about monitoring the numbers. We've talked about marketing activity to go and make sure we're hitting those numbers. And if the VAT threshold is anywhere near your horizon, now is the time to start planning for it in your pricing review. And of course, that episode coming up in April. So we've got nine days. That's all we've got to get your records up to date, to talk to your accountant, to check your pension, to know your VAT position, and to make sure you know what you've paid yourself this year. The anxiety always comes from people not really knowing their numbers, not knowing what you owe, what you are owed, and what your business is actually worth. And that is exactly the work that we do together in One-to-One Ultimate Clarity. It's my 12-month profit and pricing strategy, which is not just about what to charge. It's about understanding your financial picture clearly enough that tax year stops being a source of dread and starts being just another date in the diary. We work together for 90 days to give you your five-year business plan and 12 months of crystal clear strategy. Book your free 30-minute conversation.

The link is in the show notes. And in the meantime, enjoy your Easter break. You have earned it. Last episode of the week on Monday, we're back with a big one. How to know whether your business is actually working. Until then, take care.