Hair and beauty salons call for a 10% VAT rate ahead of the Budget

This article is for hair salon, barbershop and beauty salon owners who want to know what the VAT campaign means for them and how to manage cash flow while they wait for the Budget. The hair and beauty industry is labour intensive, so VAT and employment costs weigh heavily. Below we set out the figures and the funding options for salons. Smart Funding Solutions is a broker, not a lender: we compare whole-of-market options across 300+ lenders, arranging funding from £10,000 to £20 million.

01The open letter

As Business Matters reported on 6 October 2026, around 2,000 salon owners and workers have signed an open letter, organised by the British Hair Consortium (BHC), asking for VAT on hair and beauty salons to be cut to 10%. The BHC, which represents more than 50,000 professionals, wants a split-rate VAT model like Ireland's, with a lower rate for labour-intensive services.

According to the BHC:

• The sector lost 21,400 jobs last year, nearly a quarter of its employees.
• That is equal to about 20 employing salons closing every working day.
• Hair salon apprenticeships have fallen 78% since 2015.

Toby Dicker, co-founder of the BHC, said: "The root cause is the impact VAT has on a service-based industry like ours."

02Salons and business rates

The trade body the National Hair & Beauty Federation (NHBF) has made the same call. As Hairdressers Journal reported in July, the NHBF says the sector has more than 50,000 VAT and PAYE registered businesses, supports more than 178,000 people and turns over about £6.1 billion. Its president, Fiona Johnston, said: "The first and most urgent step should be a VAT cut."

Salons were left out of the 20% business rates cut for pubs, social clubs and live music venues that starts in April 2027. Ireland, meanwhile, cut its VAT rate for hairdressing from 13.5% to 9% on 1 July 2026. Whether the UK follows will be clear at the Budget on 28 October. See our Autumn Budget 2026 article for what else is expected.

03What it means for salon owners

Most of a salon's costs are wages, and VAT is charged on the full price of each service once turnover passes the £90,000 registration threshold. That means a large quarterly VAT bill for many owners, which can be hard to meet after a slow month. The run-up to Christmas is usually busy, but January and February are often quiet, while rent, wages and VAT keep coming.

Owners who plan for the VAT quarter and the quiet weeks, rather than reacting when a bill lands, have more options. Our page on Time to Pay or a tax loan compares two ways to spread an HMRC bill.

04Funding options for salons

• VAT loans spread a quarterly VAT bill over several months.
• Merchant cash advance is repaid as a share of card takings, so repayments ease in quiet weeks.
• Fit-out finance pays for a salon refit.
• Equipment finance spreads the cost of chairs, basins and treatment equipment.
• Small business loans cover general working capital.

Our beauty salon finance page explains how lenders view salons, and our aesthetics clinic finance page covers clinics. Self-employed stylists can see our page on self-employed loans.

Most of a salon's costs are wages, and VAT is charged on the full price of each service once turnover passes the £90,000 registration threshold.

05What lenders look at for salons

Lenders look at how long your salon has traded, your monthly turnover and card takings, and how your business bank account is run. Because many salons rent chairs or rooms to self-employed stylists, lenders may ask how your income is split between your own services and chair rental. A full appointment book, regular clients and a steady retail product line all help. For refits and equipment, suppliers' quotes and a plan for how the investment will lift bookings or prices make an application stronger. Any HMRC arrears, including late VAT, will be checked, so it pays to arrange funding before a bill falls overdue.

06How to compare your options

1. Work out your next VAT bill and your cash flow through January and February. Our VAT calculator can help.
2. Decide whether you need to spread a tax bill, fund a refit or cover a quiet spell.
3. Have recent bank statements, card takings and your latest accounts ready.
4. Use Instant Quotes to see your lender matches instantly, with no credit check.
5. Compare offers on the total amount you repay.

The Budget may or may not bring a VAT cut, but your next VAT bill is certain. Get your Instant Quotes to see which lenders could back your salon. Lenders make every decision, and all finance is subject to status.