As a hairdresser, you might not rely on your salon work as your sole source of income. Many self-employed hairdressers work part-time or have multiple income streams from various sources, such as freelance styling, teaching, product sales, or even other part-time jobs. Managing tax in such situations can be tricky, but understanding how to report and organise your income streams is key to staying on top of your finances.

This guide will help you navigate the complexities of tax when you have multiple income streams, ensuring you're compliant and efficient with your tax management.

Understanding Your Tax Obligations

Whether you're working full-time in the salon or combining it with freelance work or other jobs, you are still required to pay tax on your total income. Your total income includes all sources - hairdressing services, freelance gigs, retail sales, and any other side jobs you may have. The key is to report all these earnings to HMRC and pay the appropriate amount of tax based on your total income.

How Different Income Streams Are Taxed

Different income streams may be taxed in different ways. Here’s a quick breakdown:

1. Salon Work (Self-Employed): As a self-employed hairdresser, you'll report the income from your salon work on your Self-Assessment tax return. You’ll be taxed on the profit, which is your income minus allowable business expenses.
2. Freelance Work: If you're freelancing as a hairdresser or offering additional services like teaching or event styling, you’ll also report this income as self-employed earnings. Keep track of the income and expenses separately for each activity to simplify the reporting process.
3. Other Jobs: If you also work part-time in a different job, your income from this role will likely be taxed under the Pay As You Earn (PAYE) system. You won’t need to report this income on your Self-Assessment tax return, but if your combined income exceeds the personal allowance, you’ll be taxed on it.
4. Product Sales: If you're selling hair care products, tools, or accessories, this counts as additional income and should be reported in your Self-Assessment tax return. You can also claim expenses related to the purchase of the products for resale, which may reduce your taxable income.

How to Keep Track of Multiple Income Streams

When you have multiple sources of income, keeping track of your earnings, expenses, and taxes becomes even more crucial. Here are some tips to stay organised:

• Use Separate Accounts: If possible, use separate accounts for your hairdressing income and any other sources of income. This will help you easily track the income and expenses related to each job.
• Use Accounting Software: Make it easier to track income and expenses for each income stream. Accounting tools can help you separate business earnings from freelance or other income, simplifying your tax return process.
• Keep All Receipts and Records: Keep detailed records for each income stream, including receipts for business expenses and income logs. This will ensure that you claim everything you’re entitled to and avoid paying unnecessary taxes.

Tax Deductions for Multiple Income Streams

When you have more than one source of income, you may also have more opportunities to deduct business expenses. For example, if you’re also teaching hairdressing, the expenses related to your teaching, such as travel or teaching materials, can be deducted from your income.

You can claim expenses for each business activity, including:

• Salon and freelance expenses (product purchases, equipment, etc.)
• Teaching-related expenses (travel, training materials)
• Marketing costs (website, advertising, etc.)

Make sure to keep detailed records for each of your income streams to claim the appropriate deductions.

Self-Assessment Tax Return for Multiple Incomes

At the end of the tax year, you’ll need to complete a Self-Assessment tax return. If you have multiple income streams, the process will be slightly more complex, but it’s manageable if you’ve kept organised records.

You’ll need to report:

• Income from all sources: This includes your salon work, freelance income, part-time job income, and any product sales.
• Expenses: You can deduct business expenses for each of your income sources, but make sure to separate them for accuracy.
• Tax Calculation: HMRC will calculate your tax based on your total income and allowable expenses.

Managing tax when you work part-time or have multiple income streams doesn’t need to be complicated. By staying organised, keeping track of your earnings and expenses, and using the right tools, you can manage your finances and meet your tax obligations efficiently. If you’re unsure about what to report, it’s always worth consulting an accountant to ensure you're filing correctly.