VAT - What can self employed salon beauticians claim back in the UK?

[Nicoleh92]

Hi guys im a level 3 nails student, nearing the end of my course, i will soon to be self employed. I was just wondering, what i can and cant claim VAT on in the UK ?

I know a lot of trading websites, like beautyexpress, and sallyexpress all add VAT on to their products, i was just wondering if you can claim some of it back. I know you can claim some money back on items you need for your business. But im a bit unsure about items like hard gel, and gel polishes, Can i claim VAT and expenses on them ?

 

[BannerPenguin]

Are you VAT registered?

 

[Nicoleh92]

Hi im not yet, im just trying to find out information before i don anything

 

[pure]

Unless you're VAT registered you can't claim back VAT. A business doesn't normally register for VAT until they have an annual income in the region of 70k and for it to be of any benefit that business then needs to charge VAT also.

What you can do however, is offset your expenses against any income. So at the of the year you deduct all your business expenses from your income for the year. What's left is what you pay personal tax on depending on your allowance.

For more information it would be good to look at the HMRC website.

 

[Nicoleh92]

oh right okay, is that similar to claiming tax relief ?

Thanks im looking on HMRC now just trying to get my head round it all.

 

[Cholo]

The VAT threshold is £81k.

You can opt to become VAT registered if you have turnover (not income) below this amount but it means that you'll have to charge your clients VAT (20%).

You'll find a good range of webinars on the HMRC website. That should help explain the different scenarios

 

[Cholo]

https://www.gov.uk/government/collections/hmrc-webinars-email-alerts-and-videos

 

[Nicoleh92]

Thank you so much il check this out now

 

[hazelb]

It easy to get confused when starting out as your hear phrases like 'are you vat registered' , ' can i claim the vat back', ' this will come out of my business expenses'

See if you can find a course about basic tax or completing your tax return. lots of adult ed colleges do them and it makes things a lot easier to understand.

Setting up as a sole trader means you pay tax on your profit. That's money you take minus your cost of doing business ( that would include products, materials, nail colours whatever -that's why you keep receipts).


VAT is totally different. Business become VAT registered for a few reasons

Because turnover is above the VAT threshold.

Another is because they buy a lot of things with vat on them that is a major part of the cost they pass onto their customer ( think of a builder paying £1000 for bricks and then £500 for laying them )

Another is because consultants may want to look professional ie 'John Smith Conveyancing'

Being vat registered makes book keeping very complicated, you have to submit monthly VAT reports and even though you may 'claim vat back' on your products. You have to pass the VAT you charge your customers back to the government!

Anyone feel free to jump in if I got any of that wrong.

 

[Debbsxo]

Best advice - get a good accountant!!

 

[Cholo]

It easy to get confused when starting out as your hear phrases like 'are you vat registered' , ' can i claim the vat back', ' this will come out of my business expenses'



See if you can find a course about basic tax or completing your tax return. lots of adult ed colleges do them and it makes things a lot easier to understand.



Setting up as a sole trader means you pay tax on your profit. That's money you take minus your cost of doing business ( that would include products, materials, nail colours whatever -that's why you keep receipts).





VAT is totally different. Business become VAT registered for a few reasons



Because turnover is above the VAT threshold.



Another is because they buy a lot of things with vat on them that is a major part of the cost they pass onto their customer ( think of a builder paying £1000 for bricks and then £500 for laying them )



Another is because consultants may want to look professional ie 'John Smith Conveyancing'



Being vat registered makes book keeping very complicated, you have to submit monthly VAT reports and even though you may 'claim vat back' on your products. You have to pass the VAT you charge your customers back to the government!



Anyone feel free to jump in if I got any of that wrong.

Only that VAT returns are quarterly, not monthly.
It's not actually that complicated but it is something else to keep on top of!

Also, for the OP, you haven't said whether you'll be setting up as a sole trader or limited company. Tax guidelines are slightly different- chances are you'll be a sole trader initially which is probably the easiest option, at least until your turnover reaches a point where it becomes more tax efficient to become a LTD company.

HTH

 

[SalonsByGregory]

As others have said there are two separate questions - can you claim the cost of your products and can you reclaim the VAT?

Firstly, you can offset the cost of your products against income for your income tax. If your aren't VAT registered then you claim the total cost including VAT (i.e. If something costs £120 including VAT you claim £120).

If you are VAT registered you only claim £100 off your income for tax purposes. But you reclaim £20 on your VAT return. You have to add 20% to all sales and pay this to HMRC. So if you had sales of £1,200 and costs of £120 you pay VAT of £180. You would need a sales system as you have to issue a vat receipt to your clients. And there is a lot of additional paperwork. You would probably only register for VAT now if you think you will have sales of over £81,000 in the future. Best speak to an accountant as it all depends on your particular circumstances .