A mixed bag from the 2018 Budget for hair and beauty salons, says the NHBF

Yesterday the Chancellor of the Exchequer, Philip Hammond, presented his final budget before the UK leaves the European Union.  It contained some good news for hair salons, beauty salons and barbershops on apprenticeship costs, business rates and VAT but also announced inflation-busting increases to the National Living Wage/National Minimum Wage.

Apprenticeship costs

• The mandatory cash contributions from employers towards the cost of apprenticeship training and assessment will be reduced from 10% to 5%, taking effect from April 2019 for new starters.  

What does that mean for salons?

From 1 January, changes to funding bands mean cash contributions for employers of apprentices on the hair professional Trailblazer standards are already going down from £900 to £700, but following today’s announcement this will go down again to £350 in April 2019 for new starters.  Employers of apprentices on the beauty professional (beauty therapy) Trailblazer standards will also see cash contributions go down from £700 to £350 in April.

We’re delighted that our campaign against cash contributions for small business employers has been successful

Hilary Hall, NHBF chief executive commented, “We’re delighted that our campaign against cash contributions for small business employers has been successful.  Salons with less than 50 employees who take on 16-18 year olds (or 19-24 year olds who have been in care or who have a local authority care plan) will continue to pay nothing towards the cost of apprenticeships. If you’re thinking of taking on an older apprentice (19+), waiting until April will save you at least £350 per apprentice.”

Business rates

• Business rates for hair salons, beauty salons and barbershops with a rateable value of £51,000 or less will be cut by a third for two years.  In a further move to help the high street, £675m has been allocated for local high streets to improve transport links, re-develop empty shops as home and offices and to restore or re-use old and historic properties.

What does that mean for salons?

Hilary Hall commented: “The extra relief for small salons is welcome, but it still leaves large salons with the burden of business rates.  We have also been fighting hard for our members on business rates which we believe are unfair to ‘bricks and mortar’ businesses like salons while online businesses pay nothing.  The Chancellor announced a new Digital Service Tax which will apply to on online platforms such as Amazon and Facebook, which may signal that the government is taking small steps towards addressing this imbalance.”

VAT registration threshold

Despite speculation that the Chancellor would slash the VAT registration threshold to £43,000, he announced that it would be maintained at the current level of £85,000 for two more years until April 2022. 

What does that mean for salons?

Hilary Hall, NHBF chief executive commented: “We responded to the government’s consultation on the VAT registration threshold, calling for a smoothing of the ‘cliff edge’ which currently lands salons with an immediate bill of £17,000 as soon as they go £1 over the threshold.  The Chancellor has not ruled this out, but as VAT is a tax controlled by the European Union, he will wait until the terms of Brexit are clear.  There are clear signals though that the longer term plan for VAT is to reduce the threshold after 2022.”

Wage rises

However, the Chancellor also announced inflation-busting increases for the National Living Wage and the National Minimum Wage:

What does this mean for salons?

Hilary commented, “We have been warning hair and beauty salons to expect higher than inflation increases, especially to the apprenticeship rate.  The government has set a target of £8.62 per hour by 2020 for the National Living Wage, so salons should plan now for a further large increase next year.”