The hair and beauty industry is in crisis. Rising costs, economic downturns, and unfair tax structures have put thousands of salons at risk of closure. That’s why salon owners are campaigning to lower VAT from 20% to 10%, or even 5%, to level the playing field with industries like hospitality, which have already benefited from reduced VAT. 

But while the fight for tax reform continues, salon owners can take action now to reduce their tax liability with SplitSum: a payment solution built for businesses that work with independent contractors/self-employed staff. It splits customer payments at the point of sale and each party receives their portion instantly.

The VAT Burden on Salon Owners

Hair salons, nail salons, and beauty studios that rent chairs or work with self-employed professionals face a unique challenge: traditional credit card processors deposit all customer payments into the business’s account, even the portion that belongs to the stylist or technician. This inflates the salon’s revenue on paper, increasing its taxable income and ultimately leading to higher VAT payments. Since all revenue flows through the business, HMRC views it as taxable income, even if a large percentage belongs to independent stylists. The system just doesn't make sense for the salon industry. On top of that, salon owners are left managing manual payouts, spending valuable time calculating commissions and transferring earnings, all while trying to keep their revenue and accounting records accurate. With multiple stylists handling transactions, it quickly becomes a logistical headache that only adds to the already high cost of running a salon.

Self-Employed vs. Employed Staff

The headaches and lack of control caused by both the VAT laws and the limitations of traditional credit card processors have caused many salon owners to opt into a system where their stylists are employees and not self-employed. This only furthers the operating costs for salons leaving them in a really tricky situation where the salon makes barely any money. Additionally, rising costs leave stylists feeling frustrated by the inability to receive an increased wage. These factors are not sustainable for long term business operations. 

The desire for more control over the handling of customer payments is entirely understandable from a business point of view. The methods often taken up by other similar businesses (cash only, chasing contractors for payments, taking in all money and paying out), either lack the control desired or cause an inflation to turnover that is costly. This is where SplitSum comes in. It can give you the control you desire, operating from one central interface and card reader, enabling you to make your stylists self-employed and keep their money separate from your businesses.

How SplitSum Helps Salons Save on Taxes & Admin Costs

SplitSum automates the entire payment process, ensuring that each stylist or beauty professional gets paid directly, without the salon acting as the middleman. Instead of all funds going into the business account, each transaction is automatically split at the point of sale and sent to the appropriate party. By sending each stylist’s share of a transaction directly to their account, the salon avoids reporting earnings that aren’t actually its income, reducing its taxable turnover and potential VAT liability. Not only does this help avoid a hefty VAT bill, but it also eliminates the need for time-consuming manual payouts. Salon owners no longer have to manually track commissions or distribute earnings after every transaction. SplitSum handles everything instantly, allowing businesses to focus on customers rather than paperwork. This functionality is unmatched in the industry and to achieve otherwise is extremely costly needing a custom developed solution.

Proof That It Works: How Three Kings Tattoo Saved £34,000

Tattoo shops face the same financial struggles as salons as they utilise independent artists in a similar way. Three Kings Tattoo London switched to SplitSum in January 2024 and saved £34,000 in potential VAT liability in just one year. With each artist receiving their share of the payment automatically, the studio avoided a massive tax bill while also saving the owner a huge amount of time in admin. These same tax-saving benefits apply to salons, barbershops, and beauty studios that work with independent stylists, barbers, or technicians. If a tattoo shop with a handful of artists can save this much in a year, imagine the financial impact on a busy salon processing payments for multiple stylists and beauty professionals every single day.

"As the owner of Three Kings, I love what SplitSum saves me: money and time. I would never go back to a traditional credit card processor." – Amanda, Owner of Three Kings Tattoo London

"As a cosmetic artist at Three Kings, I love that I can quickly get my clients locked in with a deposit and I can see all my transactions in real time. I have peace of mind knowing there won’t be any calculation errors in my payouts." – Sophie, Cosmetic Tattooer at Three Kings Tattoo

Get Started with SplitSum Today

While the campaign for lower VAT continues, salon owners don’t have to wait to start saving. With SplitSum, you can immediately reduce your tax burden, simplify your payment process, and eliminate time-consuming admin work; All without needing additional hardware. You can use your phone as a card reader with Tap to Pay or integrate a Stripe card reader if you prefer. Setting up SplitSum is quick, and we offer free setup calls to walk you through the process. If you want to see how it works before committing, we also offer live demos so you can experience the benefits firsthand.

You don’t have to accept higher VAT payments as the cost of doing business. Start taking control of your finances today. Book a free demo or sign up for our 14-day free trial (credit card required) and see how SplitSum can transform your salon’s payment system.

The beauty industry is fighting for fairer tax policies. In the meantime, make sure you’re not overpaying. Book a free demo today and start taking control of your finances.  

Sign up now or schedule a call to get started!