Being self employed.

893bet

MY wife wishes top become a self employed hair dresser.

Her plan is to "rent" a mirror in a salon and deal with her clients there.

How does she go about this?

She also works part-time in a teaching role for educations institutes. I am not sure of this complicates things.

(mod move if in the wrong place!)

Jonny303

Does she already work from home and have a client base or will she be hoping to start fresh and build up?

Will her pricing be centrally based or can she price herself? (Does the salon have set prices and she works off those)

I ask this because if she is working from home, she is more than likely on the cheap side. If she then brings these customers and has to charge salon prices, she may well find she loses quite a lot.

I'm on the other side of the fence on this, I have a salon which I was running but licening out the whole lot to one of the staff. We looked at the individual chair route and walked away. I'm sure it can work really well but there is a lot of pitfalls when you have a number of people working for themselves under the one roof

893bet

She would have her own client base already from working in other salons direct.

She will have her own pricing that won't be published in the salon. She will not be doing "walk ins".

100 % appointment only. She has struck a deal with a salon on a flexible per day rate.

893bet

Would she have to charge VAT to customers?

ironclaw

893bet wrote: »

Would she have to charge VAT to customers?

She'll need to keep full accounts. I doubt the salon owner would want someone doing cash deals in their premises, would invite all sorts of unwanted accounting scrutiny if you had a fall out or otherwise other customers got wind.

She can operate as a sole trader but she is now about the parapet of working from home for cash in a more visible role. You should factor these accounts and preparation into your costs.

Jonny303

It depends on if she is paying VAT on her chair. VAT can be very friendly to hairdressing, 9% on sales but 23% on most purchases so depending on turnover etc even if you don't hit the threshold it can be worth it.

893bet

ironclaw wrote: »

She'll need to keep full accounts. I doubt the salon owner would want someone doing cash deals in their premises, would invite all sorts of unwanted accounting scrutiny if you had a fall out or otherwise other customers got wind.

She can operate as a sole trader but she is now about the parapet of working from home for cash in a more visible role. You should factor these accounts and preparation into your costs.

I understand that.

Jonny303 wrote: »

It depends on if she is paying VAT on her chair. VAT can be very friendly to hairdressing, 9% on sales but 23% on most purchases so depending on turnover etc even if you don't hit the threshold it can be worth it.

I noticed the 9%. There is zero change of her meeting the threshold which I understand is around 36K a year. It is her intention to only work 1-2 days a week (as mentioned she works part time in another role). Does this mean she doesnt need to charge VAT to her customers but equally she cant claim VAT on products.

I expect her weekly accounts to look like:

Outgoings:
Rent 100 euro.
Products and supplies 50euro

Ingoing:
450 for a two day week

"profit"= 300
And this is what she pays tax on?

Am I over simplifying it or is there going to be all VAT returns required etc?

Silverbling

you only need to register for VAT when the turnover is more than €75k but I am products and sales not hairdressing

best of luck to her, being self employed is a roller coaster, I would suggest she registers with LEO and does the start your own business course because once she has done that she can do the "do your own books" course, it saves a fortune in accountants fees if you can do your own and send them over for sign off.

If you are in South Dublin there is a 3 day conference in May in the Royal Marine hotel, I bagged a spot with a mentor today for global marketing, there are different options available.

Mrs OBumble

Is she going to leave all the profit in the company as capital, or will she draw a wage for herself? If the latter, the company doesn't pay tax on the wage, but she pays personal income tax on it.

Silverbling

893bet wrote: »

Would she have to charge VAT to customers?

Only if she is VAT registered

pedroeibar1

Mrs OBumble wrote: »

Is she going to leave all the profit in the company as capital, or will she draw a wage for herself? If the latter, the company doesn't pay tax on the wage, but she pays personal income tax on it.

Reading the posts the probability is that she will be a sole trader. (?)

893bet

Yes sole trader.

893bet

893bet wrote: »

I understand that.



I noticed the 9%. There is zero change of her meeting the threshold which I understand is around 36K a year. It is her intention to only work 1-2 days a week (as mentioned she works part time in another role). Does this mean she doesnt need to charge VAT to her customers but equally she cant claim VAT on products.

I expect her weekly accounts to look like:

Outgoings:
Rent 100 euro.
Products and supplies 50euro

Ingoing:
450 for a two day week

"profit"= 300
And this is what she pays tax on?

Am I over simplifying it or is there going to be all VAT returns required etc?

Is this how it will work? Or is it far more complicated?

jimmii

893bet wrote: »

Is this how it will work? Or is it far more complicated?

Pretty much. Income - costs = profit. There will possibly be costs that hadn't been anticipated.

In terms of vat if she doesn't register there's obviously no return needed. Whether or not it makes sense to register will depend on the costs and what rate is paid on those just a quick back of a napkin calculation to see if it adds up is all you really need. A return probably seems like something daunting but it's actually very straightforward. If there's vat on the rent that's going to take almost 10% of the profits if she doesn't register that could be the decider.

Mrs OBumble

893bet wrote: »

Yes sole trader.

So in that case, there's no company tax involved. All her profit will be drawings, and she will personally pay income tax on that at the appropriate rate based on her other income.

You might need to consider other expenses for things like marketing (flyers, business cards, maybe some Facebook advertising to build the client base). Also, how will she take bookings: does she have her own phone (an expense) or is use of a receptionist covered by the rent?


In the future, if she ever know that next year's income will be less - eg enough to move her into the lowest tax bracket, then she may want to investigate setting up a company the year before, paying corporate tax the year before and drawing the year after. Would definitely need to add an accountant to the budget in this case, but there are circumstances where it can be worthwhile.

JMR

This is the best advice you've received here.

Mrs OBumble wrote: »

So in that case, there's no company tax involved. All her profit will be drawings, and she will personally pay income tax on that at the appropriate rate based on her other income.

You might need to consider other expenses for things like marketing (flyers, business cards, maybe some Facebook advertising to build the client base). Also, how will she take bookings: does she have her own phone (an expense) or is use of a receptionist covered by the rent?


In the future, if she ever know that next year's income will be less - eg enough to move her into the lowest tax bracket, then she may want to investigate setting up a company the year before, paying corporate tax the year before and drawing the year after. Would definitely need to add an accountant to the budget in this case, but there are circumstances where it can be worthwhile.