Hairdresser fears she might lose her dwelling over tax hikes | EUROtoday

“I never wanted to do anything else but be a hairdresser,” mentioned Kerry Larcher, who opened her first salon when she was 21-years-old.

Despite efficiently rising her enterprise in Hornchurch, in East London, over three many years, the 50-year-old says she now faces shedding her life’s work and her dwelling.

Tax rises in October’s Budget are “crippling” her salon enterprise, she mentioned, and the additional £23,000 a yr imposed by the chancellor might show the ultimate nail within the coffin.

“I have been crying myself to sleep because, since October, this has been the worst period of my personal life in 30 years,” she mentioned.

“I feel ashamed to get into debt but we are gradually eating through our business reserves and I can’t take wages if I don’t make a profit.

“I might lose my home if the enterprise folds – that’s the actuality and if issues do not change it’s scary the life out of me.”

The government says the tax changes announced by Chancellor Rachel Reeves were needed to stabilise the economy.

They say their plan to reform business rates will mean lower taxes for High Street businesses such as hair salons when it comes into effect in 2026-27.

But salon owners fear this may come too late to save their businesses.

Cutting a client’s hair, Kerry explained she could not afford to take on any new apprentices this year and had been forced to reduce the hours of her current 12 apprentices to the minimum.

The next step will be to halve the number of apprentices over the next year as their contracts finish, ending up with six by the end of this year.

If the business cannot recover over the next four years, the rest of her 28 staff, who are nearly all local women who became stylists after serving an apprenticeship at the salon, are facing potential redundancy.

“I’m having to drastically cut back my total worker numbers to chop prices simply to outlive,” she mentioned.

“Where are the long run hairdressers going to return from if good, employed salons exit of enterprise?”

Kerry added the way the chancellor is treating salons, which overwhelmingly employ women, “completely goes in opposition to the targets of the federal government” in growing the economy and supporting workers.

Part of the pressure is coming from the UK’s Value Added Tax (VAT) rules, which do not allow businesses to reclaim tax on staff costs in the same way they can for goods, putting labour-intensive businesses such as hair or beauty salons at a disadvantage.

“If you have a look at a restaurant, one waiter can serve a number of tables of 4 prospects within the area of an hour and the cafe can reclaim the VAT on all of the food and drinks they serve,” Kerry explained.

“Whereas one salon buyer wants consideration from the receptionist, the apprentice for hair-washing, and the stylist in that very same hour and we are able to solely declare VAT again on a tube of hair color.”

Many hairdressers went into debt due to the pandemic, said Kerry, and the added pressures of increases in employer National Insurance contributions (Nics) and business rates are now threatening the future of salons across the country.

For Kerry’s salon, the Vanilla Rooms, the tax increases have added a “devastating” £23,000 extra to her annual costs, through a combination of the threshold at which employers start to pay Nics on staff wages being lowered to £5,000 and changes to business rates.

Her Nics costs have risen 29%, from £42,000 to about £54,500 – now costing more than £1,000 a week – and business rates have gone up by 144%, from £700 to £18,000 a year.

Kerry is one of 50,000 UK hairdressing professionals represented by the British Hair Consortium (BHC), which has urged Rachel Reeves to take action or face the “collapse” of the industry due to rising costs.

The BHC argues the most efficient support the government could offer is through halving VAT for salons, because staff wages make up 60% of their costs.

The association says cutting VAT could actually increase overall tax take, by preventing more workers going self-employed or entering the black market.

Kerry’s case was one of those raised by Conservative MP Julia Lopez in a debate this week in Parliament’s Westminster Hall, where she urged Rachel Reeves to lower VAT from 20% to 10% to support the hair and beauty sector.

Lopez, the MP for Hornchurch and Upminster, said Kerry was not alone in being forced to consider whether she will have to shut up shop completely.

“Some the elevated payments for salons are simply unbelievable,” she said, adding that women were disproportionately impacted by the changes.

“It’s laborious to disregard the affect, not to mention the irony, of a chancellor celebrating herself for being the primary lady to carry that workplace whereas concurrently hammering the sectors that make use of, serve and are sometimes led, by girls.”

Liberal Democrat business spokesperson Sarah Gibson agreed that Reeves’ Budget had implemented “an unfair tax on jobs” and the government must offer tax relief for small businesses in June.

Gibson said an increasing number of salons are opting to rent chairs out to self-employed staff, instead of employing stylists directly, to avoid paying tax.

“If salons do not get assist we are going to see an enormous enhance in folks changing into chair renters,” she said, which reduces the Treasury’s overall tax take.

Responding for the Labour government, Small Business Minister Gareth Thomas defended the chancellor’s decisions in her October Budget as “necessary for long run stability”.

Salons are “a significant pillar of our excessive streets”, he said, adding “many hair and sweetness companies will profit from among the different measures the chancellor launched”.

“We elevated the employment allowance so that just about a million employers pay no nationwide insurance coverage contributions in any respect.

More than half of employers will see no change or achieve from that bundle, and that features many hair and sweetness companies,” he informed MPs.