Tax and VAT for Salon Owners in Ireland: A Plain-English Guide

"Do I need to register for VAT?"

"What expenses can I write off?"

"Am I paying too much tax?"

These questions keep salon owners up at night. And honestly? Irish tax rules aren't as complicated as they seem - once someone explains them in plain English.

That's what this guide does.

---

The Basics: How Salon Income Gets Taxed

First, understand the structure. As a salon owner in Ireland, you'll deal with:

1. Income Tax (if sole trader) or Corporation Tax (if limited company)
2. VAT (Value Added Tax) - maybe
3. PRSI (social insurance contributions)
4. USC (Universal Social Charge)
5. Employer's PRSI (if you have staff)

Let's break each one down.

---

VAT: The Big Question

Do I Need to Register?

The threshold: You must register for VAT if your turnover exceeds €37,500 in any 12-month period.

That's total sales, not profit.

Example: If you're charging €30 per haircut and doing 25 cuts per week, that's €39,000/year. You need to register.

What Rate Applies to Salons?

Hairdressing services in Ireland are charged at the reduced VAT rate of 13.5% (not the standard 23%).

This is good news - it means you add less to your prices.

How VAT Works in Practice

You charge VAT on:

• All haircuts and styling services
• Treatments (color, highlights, etc.)
• Retail product sales (at 23% standard rate)

You can reclaim VAT on:

• Equipment purchases
• Professional products
• Fit-out costs
• Business utilities
• Accountancy fees

Example calculation:

When to Submit VAT Returns

Most salons file bi-monthly (every 2 months).

Due dates:

• Jan-Feb: Due March 19
• Mar-Apr: Due May 19
• May-Jun: Due July 19
• Jul-Aug: Due September 19
• Sep-Oct: Due November 19
• Nov-Dec: Due January 19

Should I Register Voluntarily?

If you're under the threshold, you can still register voluntarily.

Pros:

• Reclaim VAT on equipment and setup costs
• Looks more professional to some clients
• Already set up when you exceed threshold

Cons:

• Admin burden
• Must charge VAT (raises prices)
• More paperwork

Recommendation: If you're doing a big fit-out with lots of equipment, voluntary registration can save thousands in reclaimable VAT. Otherwise, wait until you hit the threshold.

---

Income Tax (Sole Traders)

If you're a sole trader, your salon profit is taxed as personal income.

Tax Bands 2025-2026

Note: Thresholds may differ for married couples.

Plus USC (Universal Social Charge)

Plus PRSI

Self-employed pay Class S PRSI at 4% on all income.

Real Example

Sarah's salon makes €60,000 profit

Effective rate: About 34%

---

Corporation Tax (Limited Companies)

If you've set up as a limited company:

Corporation Tax rate: 12.5% on trading profits

This looks better than 40% income tax, but remember:

• You still pay income tax when you take money out as salary
• Dividends are taxed too
• Accounting costs are higher

When Ltd makes sense:

• Profits over ~€80,000/year
• You want liability protection
• You're planning to scale
• You want to retain profits in the business

---

Allowable Expenses: What You Can Write Off

This is where you save money. Every legitimate business expense reduces your taxable profit.

Fully Deductible

Capital Allowances (Equipment)

Big purchases like chairs, backwash units, and dryers are "capital expenditure." You can't deduct the full cost in year one, but you can claim capital allowances:

• 12.5% per year over 8 years
• Or accelerated allowances for energy-efficient equipment

Example: Buy a €2,000 styling chair

• Year 1: Deduct €250
• Year 2: Deduct €250
• (continues for 8 years)

Home Office (If Applicable)

If you do admin from home, you can claim a portion of:

• Electricity
• Heating
• Broadband

Based on the percentage of home used for business.

What You CANNOT Claim

• Personal expenses
• Clothing (unless branded uniforms)
• Your own haircuts (nice try)
• Fines or penalties
• Entertainment (mostly)

---

Employer Obligations (If You Have Staff)

PAYE (Pay As You Earn)

You must deduct income tax from employee wages and send it to Revenue.

Employer's PRSI

You pay an additional 11.05% on top of wages for employees earning over €441/week.

Example: Employee earning €600/week

• Employer's PRSI: €600 x 11.05% = €66.30/week
• That's €3,450/year extra per employee

Payroll Software

You'll need:

• Revenue Online Service (ROS) access
• Payroll software (Sage, Thesaurus, or similar)
• To file payroll submissions each pay period

Or: Hire a payroll service (€30-80/month depending on staff numbers).

---

Key Deadlines

Miss a deadline? Interest and penalties apply. Set calendar reminders.

---

Common Mistakes to Avoid

1. Mixing personal and business finances - Keep separate bank accounts
2. Not keeping receipts - Revenue can ask for proof of any expense
3. Forgetting to register for VAT - Penalties if you exceed threshold
4. Underestimating tax bill - Set aside 25-35% of profits
5. DIY accounting when it's too complex - An accountant often saves more than they cost
6. Missing preliminary tax - The October payment catches many people out

---

Do I Need an Accountant?

Probably yes.

A good accountant costs €1,000-3,000/year but typically saves you more than that through:

• Identifying deductions you'd miss
• Ensuring compliance
• Handling VAT returns
• Year-end accounts
• Advice on structure

At minimum, get an accountant for:

• Your first year in business
• When you register for VAT
• When you hire staff
• If you're considering going Ltd

---

Quick Reference: Salon Tax Checklist

Monthly:

• Employer payroll submissions (if staff)
• Keep all receipts organized
• Track cash vs card payments

Bi-monthly:

• VAT return (if registered)

Annually:

• Review allowable expenses
• October 31: Preliminary tax payment
• November 15: Income tax return (online)
• Meet with accountant

---

Taxes are manageable

The Irish tax system isn't trying to catch you out. It's actually fairly straightforward once you understand the basics.

The keys:

1. Keep good records from day one
2. Separate business and personal money
3. Know when you need to register for VAT
4. Claim all legitimate expenses
5. Pay preliminary tax to avoid surprises
6. Get professional help when you need it

Do these things, and tax becomes just another part of running your business - not a source of stress.

👉 Vinci 26 helps Irish salons manage bookings, clients, and business growth - giving you more time to focus on what matters.

Build something that's truly yours.