Hairdresser fears she could lose home over tax hikes

Kerry has grown her business over 30 years but fears she could now lose it

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

Despite successfully growing her business in Hornchurch, in East London, over three decades, the 50-year-old says she now faces losing her life's work and her home.

Tax rises in October's Budget are "crippling" her salon business, she said, and the extra £23,000 a year imposed by the chancellor could prove the final nail in 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 said.

"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 could lose my house if the business folds - that is the reality and if things don't change it is frightening 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 reduce my overall employee numbers to cut costs just to survive," she said.

"Where are the future hairdressers going to come from if good, employed salons go out of business?"

Kerry added the way the chancellor is treating salons, which overwhelmingly employ women, "totally goes against the objectives of the 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 look at a cafe, one waiter can serve several tables of four customers in the space of an hour and the cafe can reclaim the VAT on all the food and drink they serve," Kerry explained.

"Whereas one salon customer needs attention from the receptionist, the apprentice for hair-washing, and the stylist in that same hour and we can only claim VAT back on a tube of hair colour."

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.

Julia Lopez MP (left) speaks to a salon owner Johnpaul Wyndham in her constituency

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 increased bills for salons are just unbelievable," she said, adding that women were disproportionately impacted by the changes.

"It's hard to ignore the impact, let alone the irony, of a chancellor celebrating herself for being the first woman to hold that office while simultaneously hammering the sectors that employ, serve and are often led, by women."

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 don't get support we will see a huge increase in people becoming 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 "important for long term stability".

Salons are "a vital pillar of our high streets", he said, adding "many hair and beauty businesses will benefit from some of the other measures the chancellor introduced".

"We increased the employment allowance so that almost one million employers pay no national insurance contributions at all.

More than half of employers will see no change or gain from that package, and that includes many hair and beauty businesses," he told MPs.

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