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 do not know what they owe or they are not sure what they should have done differently. Today we are going to fix all three. Nine days is just enough time if you get started All on build your Salon. 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 has it been for you? Few people reaching out and let me know that it has been a bumpy ride. That is 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 is going on with you? What is going on with your clients? But I am afraid there is 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 is a bit of uncertainty around and that is not great. So just my advice is make sure your salon is the haven from all of that. Let us 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 are 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 is not what this podcast is all about. It is 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 have 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 is looking really good over on the website. Now I have just got the show notes to fill in, but all of the episodes are there. We are on episode number 252. My goodness, it has been a long time since we started. So what are we talking about? We are talking about everything financial from this year. We are talking about income expenses, allowances, pension contributions, but all of that resets on the 5th of April. So we have got a window of opportunity and where a lot of people go wrong is they do not 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 is 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 are 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 am 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 are allowed to put into your pension and I want you to make sure that you are 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 have not spoken to your accountant since January, this is the nudge. So let us jump in with your end of year checklist. I have 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 are 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 is not ideal. But as far as expenses are concerned, we are 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 are recording it. So not just things like your product costs, but also things like software subscriptions, any training that you have 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 have been on a trading course, you can certainly claim for the travel there. And do not forget your bank charges too. You cannot claim what you cannot evidence. So you need to make sure that we are 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 do not do it. Do it all in one sitting will be my advice. Couple of hours this weekend, you can probably break the back of it in two hours. You will 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 have got an accurate picture. And this is also the time to look at your systems. If you are 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 is easier for us to get these figures? Maybe we need to make stuff a bit easier, but we will talk about looking forward to next year later in the episode. Item number two, I have already alluded to, that is your pension contributions, whether you are a sole trader or a company director. Your pension contributions reduce the amount of tax, 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 are hovering around a tax threshold. If you have not got a pension sorted yet, it is 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 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 are not registered for VAT, I want you to look at where you are in relation to that threshold. So currently it is 90K of taxable turnover on a rolling 12 month period. If you are getting close to that figure or if a strong Q1 has pushed you closer than expected, you need to know your position now. Do not 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 are going to owe VAT on sales that you have already made without passing it on to clients. So there is 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 are 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 are within 10 to 15K of the threshold, it is 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 is the time to start making those arrangements. Option number four, make sure you are paying yourself properly. New limited company people are generally on top of this, but if you are a sole trader, technically everything your business earns is your income, but that does not necessarily mean you have actually given yourself a decent salary. Lots of salon owners draw money as and when they need it without really formalising their own pay before the tax year closes. Make sure you have got a clear picture of what you have actually taken out of the business this year. That is your figure for income tax. For income tax purposes. If you are a limited company director, we have got salary, we have also got dividends, and your accountant will make sure that we have got the split the right way. So usually they will 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 are 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 is 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 are 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 is 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 cannot get hold of them now, take note, it might be something you need to look at in 2026. Usually accountants will increase capacity, they will 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 have 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 are keeping our separate finances for business expenses and personal expenses. If you have struggled to get those figures together, now is the time to look at your systems. Now is the time to look at your software, make sure we have got a dedicated business bank account that we do not dip into and that the business bank account is the only place our expenses are paid from. Make sure we are 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 should not need more than about 15 minutes a week as long as you are doing this consistently. It is also time to revisit your quarterly targets. Let us make sure that we have 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 have talked about monitoring the numbers, we talked about marketing activity to go and make sure we are 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 have got nine days. That is all we have 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 have 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 a one-to-one ultimate clarity. It is my 12 month profit and pricing strategy, which is not just about what to charge. It is 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 are back with a big one, how to know whether your business is actually working. Until then, take care.