Two thousand hair and beauty salon owners and workers have signed an open letter calling on Chancellor John Healey to halve the rate of VAT paid by the sector to 10 per cent, with the backing of all the industry’s trade bodies, according to campaigners.

The letter is accompanied by new research from the British Hair Consortium (BHC), which represents more than 50,000 professionals across the UK hairdressing and beauty industry. The consortium said the sector was “on the point of collapse” without an urgent cut.

According to the BHC, the sector lost nearly a quarter of its employees last year, 21,400 people, which it said was the highest proportion of any profession. The consortium put that at the equivalent of 20 employing salons disappearing every working day.

The research also found that hair salon apprenticeships have fallen 78 per cent since 2015. The BHC said they are expected to disappear entirely by the end of this parliament.

It estimated that a shift of workers to self-employment cost the government £1.2bn in lost tax revenue in 2025, and said tax avoidance and evasion had become the industry’s norm.

Toby Dicker, co-founder of the BHC, said: “The root cause is the impact VAT has on a service-based industry like ours.”

“It’s become so bad that for most owners, the only way they can keep running is to avoid VAT and Employer National Insurance, artificially sinking below the £90,000 VAT threshold,” he said.

Businesses must register for VAT once taxable turnover passes the £90,000 registration threshold set by HMRC.

Dicker said owners were “laying off staff and then renting chairs to them as self-employed contractors”, adding: “They’re doing exactly the same job as before and in the same salon, but without the rights and protections that come with being an employee and without paying National Insurance and often not paying any VAT.”

“We’re not asking for a bailout, but a structural rebalancing,” he said. He called for a split-rate VAT model, similar to the one used in Ireland, under which a reduced rate would apply to labour-intensive services.

The BHC said hair and beauty salons pay five times more in labour taxes than other independent retailers and contribute three times more VAT by turnover.

A BHC survey reported by Business Matters in November 2024 found that 40 per cent of salon owners were considering closure following the rise in employer National Insurance contributions.

Collette Osborne, owner of the Nottingham-based Hairven salon, said: “Lowering VAT to 10% would encourage businesses to hire, train apprentices, expand turnover and ultimately build a broader, more sustainable tax base.”

Osborne said more than 80 per cent of people working in the industry are female, while hospitality was the only sector that appeared to be lined up for tax reform. She said this had left female owners and employees asking how sexist the Labour Party is, adding: “Would their lack of interest be different if it was run by men – and employed mainly men?”

Last year some salon owners displayed signs barring Labour MPs from their premises in protest at business rates and National Insurance rises.

Hellen Ward, vice president of the British Association of Women Entrepreneurs and co-founder of the Salon Employers Association, said: “Without a structural change in VAT and NI, those who are involved in ’employment heavy’ industries such as ours will continue to see the destruction of opportunities for young people by way of diminishing numbers of apprenticeships and employed workers.”

“Hospitality seems to get far more support so it does make one question whether it’s jobs for the boys?” she said.

“What makes it even more frustrating is that last year we contributed to a Commons Committee report, authored by Liam Byrne, that called for significant tax reforms for small businesses,” said Dicker. “But it’s a body of work that the Government has turned a deaf ear to.”

The committee, chaired by Byrne, published its findings in February. They recommended that the government reform the VAT system to remove growth-discouraging cliff edges, including a review of the registration threshold, “particularly in labour-intensive sectors”.

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