Business

[Updated] What does the Spring Budget 2021 Mean for Hair Salons and Hairdressers?

by laurahusband / last updated March 5, 2021

Budget 2021 Hair Salons

On Wednesday 3 March, the UK Chancellor Rishi Sunak announced the March Budget 2021 ahead of UK hairdressers, hair salons and hair businesses being able to reopen in different parts of the UK over the coming months.

Rishi has set out a £65bn three-point plan to provide support for jobs and businesses as the UK emerges from the pandemic and forges a path to recovery.

The three-point plan aims to protect jobs and strengthen public finances with support for businesses and families through the pandemic, an investment-led recovery as the UK emerges from lockdown and future changes to strengthen public finances.

He said: “Taking into account the significant support announced at the Spending Review 2020, our total COVID-19 support package, this year and next is £352bn and the total fiscal support over this year and next amounts to £407bn.”

What does the industry say about how the March Budget 2021 will affect hair salons and hairdressers ahead of reopening?

The Spring Budget 2021 has revealed a number of schemes, grants and holidays are being extended due to the ongoing COVID-19 pandemic, which will benefit hairdressers, hair salons and hair businesses. However, the 20% VAT Cut for the hospitality industry has not been extended to benefit the hair industry.

Please click here for how you can help the Save Our Salons Campaign to get the VAT cut to 5% within the hairdressing industry. 

Hellen Ward, Save Our Salons co-founder told HJ exclusively:

Despite being 1/3 of the size of hospitality, despite employing 1/60 of all women working in the UK and despite the fact that VAT registered salons in the hair and beauty industry employ half of all the people working in it, yet again we are not considered worthy of any reduction in VAT. It is non-sensical as we cannot recoup VAT on our labour intensive output. However, success is not final and failure is not fatal.

Keith Conniford, CEO of the Hair and Barber Council added: “Whilst I am grateful that hair and barber salons can reopen on 12 April and there are new grants available up to £18,000 with the new Restart Grant, I am frustrated that the hair and barber sector are not being given the VAT cuts that the hospitality sector are receiving. The industry has lobbied really hard for a cut in VAT for all us.”

Richard Lambert, chief executive, National Hair & Beauty Federation points out: “We were worried the most vulnerable in our sector would find it hard to survive and reopen, but both the Restart Grant and further funding for the self-employed have thrown a lifeline to struggling businesses and professionals. We will continue to press the case for a short-term reduction in VAT to help the hardest-hit hair and beauty businesses to recover.”

Hair and Beauty Charity president Sam Grocutt said: “Today’s budget announcement has some positive news for our beneficiaries – especially those who were self-employed in 2019 and have been part of the three million who have fallen through the net of government financial support to date.  Approximately 62.5% of the professional industry is working in a self-employed capacity. Our charity has been vital to support for them, so we’re pleased there is now financial support available for those who need it and who meet the requirements for qualifying.  However, we also know that many of the beneficiaries we are helping with financial support still may not qualify for the new self-employed support as many were self-employed in July 2020 either by losing their jobs or having their employment status altered.  We have ring-fenced funds to continue supporting them.”

Maria Evangelou, The Meraki Cabin founder who has been supporting the Save Our Salons Campaign said :

“In terms of VAT – this is not the result we wanted, but this is just the start of a fantastic reset within the hair and beauty sector. Anyone who has been in business long enough knows that money comes and goes but integrity, respect and professional reputation stands tall and it is from that which we grow. This is the Save Our Salons Campaign’s true value and the message sent out to the UK Government sets a foundation for the future of the hair and beauty industry.”

Click here to read the full Spring Budget 2021 report. 

Here’s HJ’s Round-Up of how the March Budget 2021 will affect hair salons and hairdressers ahead of reopening?

Here are the aspects of the Spring Budget 2021 that could benefit hairdressers and hair salons in the coming months…

1. Business support and furlough schemes extended until September

The Coronavirus Job Support Scheme and Furlough Scheme will continue throughout lockdown and will be extended until the end of September 2021 across the UK.

There will be no change to the terms of the Furlough Scheme, however after July, businesses will be asked for a 10% contribution, rising to 20% in August and September.

Salon consultant Ryan Fox says: “This is extremely helpful for salon owners with employees, but they still have to cover the National Insurance Contributions and pension contributions part and the amount you get depends on worker’s hours and pay in the past so many salons are having to top this up.”

2. Self-Employment Income Support Scheme extended until September and accessible to 600,000 more people

For freelance and self-employed hairdressers who are able to receive self-employed support, the Self-Employed Income Support Scheme will continue until September 2021. In addition to this, 600,000 more people who filed a tax return in 2019-2020 will be able to claim for the first time.

Ryan Fox says: “People whose turnover has fallen by 30% or more will get the 80% grant, but self-employed people whose turnover has fallen by less than 30% will get a 30% grant both capped at £2,500 per month. This has also been extended to include more of those who have submitted a tax return for 2019/2020. This is very helpful for salon owners who are self-employed and their self-employed workers. However, once again the latest measures do not address the issues for many salon owners as Directors who do not receive any financial help personally from the government.”

3. New Restart Grants for hair businesses in England

There will be £5bn for new Restart Grants, which Rishi says will help businesses to reopen and get going again. He says as part of the Grant non-essential retail businesses, including hair salon businesses will receive grants of up to £18,000.

There is no clarification as to how the individual grant amounts will be worked out at the moment.

The Hair and Barber Council’s CEO Keith Conniford told HJ exclusively: “The Chancellor referred specifically to personal care within his speech on Restart Grants. These grants are for those reopening later AND those most affected by restrictions, which does include the hair, barbering and beauty sector. His statement today does not change the reopening date in England, which remains as the 12 April.”

Ryan Fox says: “This Restart Grant is very welcome and great that salons are getting the higher amount than the £6,000 that non-essential retailers are getting, and will certainly help those salons who are eligible. However, it is yet to be seen if it will be enough to save many salons.”

4. New UK-Wide Recovery Loan Scheme for businesses of all sizes

A new UK-wide Recovery Loan Scheme which will make available loans between £25,001 and £10 million, and asset and invoice finance between £1,000 and £10 million to help businesses of all sizes through the next stage of recovery.

Ryan Fox says: “This scheme is being introduced from April to replace the existing Bounce Back and Coronavirus Business Interruption Loan schemes. With loans of over £25,000 paid over six years they are 80% backed by the UK Government and no personal guarantees are required and you can apply even if you have already received an existing Bounce Back or Coronavirus Business Interruption Loan, providing you meet all other eligibility criteria. Salons should definitely look into this if it works for them, probably starting with your own bank, as it’s likely to be at a very good % rate.”

5. Business rates holiday extended to June

The business rates holiday will be extended through to the end of June 2021. Rish explains: “For the remaining nine months of the year, business rates will still be discounted by two thirds, up to the value of £2m.

Ryan Fox says: “This very important decision which will be very welcome and very helpful to salons, but would have been better at 100% until 2022.

6. Funding for skills and apprenticeships

An additional £126 million for 40,000 more traineeships in England, funding high quality work placements and training for 16-24 year olds in 2021/22 academic year. Plus there will be an extension of the apprenticeship hiring incentive in England to September 2021 and an increase of payment to £3,000. There will also be £7 million for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.

7. Statutory Sick Pay Claims

Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the Government.

8. Corporation tax frozen at 19% for small hair businesses

The rate of Corporation Tax will increase to 25% in 2023. However, businesses with profits of £50,000 or less, will continue to be taxed at 19% and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate.

Salon consultant Ryan Fox says: “Most Ltd company salons will be unaffected by this rise.”

9. National living Wage Increase

The National Living Wage (NLW) will rise from £8.72 per hour to £8.91 per hour from April 2021. This change will result in a full-time worker on NLW expecting to receive £345 more a year.

Salon consultant Ryan Fox says: “The planned rise to £8.91 will go ahead from April 2021 and will kick in at 23 years old with 21 to 22 year olds receiving £8.36, 18 to 20 year olds £6.56, under 18’s £4.62, and the apprentice rate at £4.30. This will increase wage costs at a difficult time but will help stylists on minimum wage.”

10. Business Investment Incentive

Ryan Fox says: “From April 2021 a super tax deduction scheme will be introduced to encourage companies to reinvest to grow their business. The investment can reduce their taxable profits by 130% of the cost. Salons who are investing in their businesses should speak to their accountant about how to use this incentive to reduce their tax on profits.”

11. Business Losses carry back rules

Ryan Fox explains: “The business losses carry back rules have been extended for three years so if you have suffered recent losses you should ask your accountant if you can use this change as a tax advantage to the business.”

12. VAT Deferred Payments

Ryan Fox would like to reminds everyone: “Businesses who deferred their VAT during the initial lockdown Quarter can still spread the payments over 11 months interest-free from March 2021.”

13. Extension to the VAT cut to 5% for hospitality, accommodation and attractions – not hair businesses

There is an extension to the VAT cut to 5% across hospitality, accommodation and attractions across the UK until the end of September, followed by a 12.5% rate for a further six months until 31 March 2022. However, as it stands this VAT cut will not apply to hair salons.

Save Our Salons co-founder Hellen Ward told HJ exclusively:

“We will represent all salon owners and have our own route into the Policy Advisor of the Personal Care sector to lobby for change in the way we pay VAT in the sector. We believe that the split rate model (like the Republic of Ireland) where VAT is paid at a lesser rate on services than it is on retail, will create a level playing field and save the jobs of not only those working in the sector now, but the next generation of hair and beauty professionals. Please complete our new survey so we can demonstrate to the decision makers at government level that not only are we are the beating heart of the UK high street, but that we should not be subject to the same VAT levels as retail when we cannot digitalise our expertise nor recoup VAT on our output which adds its value purely through labour. It’s time for fairer VAT treatment for us as an industry and we will not stop until we achieve our objective.”

Please click here to find out more about the Save Our Salons Campaign and to contact your MP to fight for the VAT cut to be extended to hair businesses. 

What does the support in the Spring Budget 2021 mean for hair salons?

Ryan Fox concludes: “Overall there is some relief that the Government has chosen to extend much of the vital support such as extensions to Grants, Furlough, Business Rates and a new Recovery Loan Scheme, which is all very welcome. However, they have not offered industry-specific support on VAT or addressed the issue of backdated rent which is a ticking time bomb. It is yet to be seen if the new loan scheme will help get salons through this year, but as a loan, it will continue to erode salon profits for many years to come. Now it’s even more important that you get your salon into shape to provide a better future for yourself.”

We will update this article on how the Budget 2021 will affect hair salons as more information becomes available and please do go to the gov.uk for the latest information on the complete Spring Budget 2021 . 

 

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