Written for owners of hair salons, barbershops, beauty, nail, lash and brow businesses, spas and massage, tanning, tattoo and piercing studios and non-surgical aesthetics clinics in England, Wales, Scotland and Northern Ireland.
The short version
- Cost the product and the stylist's time.Add product cost to their cost per hour times the service time. On commission, their cost is a share of the price instead.
- Divide by one minus your target share.For example, to keep half of the price before VAT for your fixed costs, divide by 0.5. Then add VAT if you are registered.
- Pay commission on the price without VAT.The VAT inside the price is owed to HMRC. Put that rule in each stylist's written terms.
In a salon you are not really selling haircuts. You are selling hours of a stylist's column, the time they can be booked. A price that looks healthy on the menu can leave very little once VAT, commission and product come out, and an empty hour in the column earns nothing at all. So price from the column up, and compare like with like: the same VAT basis, the same period, and rostered or booked hours, never a mix.
The numbers that tell you whether prices work
- Utilisation: booked service hours divided by rostered hours.
- Column productivity: net service revenue divided by available hours.
- Rebook rate: clients leaving with their next appointment booked, divided by clients served.
- Start from cost and time.Add the product cost to the stylist's cost per hour multiplied by the service time. If she is on commission, her cost is a share of the price, not an hourly rate, so use the check in step 4 instead.
- Divide by what your target leaves.Divide that by one minus your target contribution. A target of, say, 50% means dividing by 0.5.
- Add VAT if you are registered.Clients see VAT-inclusive prices, but your margins are worked net. The net is the price x 5/6 at the 20% standard rate. As of Oct 2026.
- Check what commission leaves.Pay commission on net service revenue, never on VAT. A sliding scale above a threshold beats one flat percentage. For example, at 40% commission and 10% product cost, each £1 of net service revenue leaves £0.50 for your fixed costs.
- Review before 1 April.Wage floors move each 1 April, so review prices before then, and test any rise against the VAT registration threshold first.
| Booked 28 of 35 rostered hours (80% utilisation) at £54 an hour VAT-inclusive | £1,512 |
| Less the VAT inside those prices (1/6) | -£252 |
| Net service revenue | £1,260 |
| Column productivity per available hour | £36 |
£1,260 / 35 rostered hoursCross-check: £54 x 5/6 x 80% = £36. Raise the price or fill the 7 empty hours and this number moves.
The VAT inside the price is owed to HMRC. Commission on it hands the stylist a share of tax you still have to pay.
A price rise that crosses the VAT threshold
Before any rise, check where it takes your takings. A nail technician, for example, who puts prices up 8% on £84,000 of takings goes over the £90,000 registration threshold (As of Oct 2026) and must register, and at the same prices she ends up keeping less than before the rise.
| Takings after an 8% rise on £84,000 | £90,720 |
| Less VAT at 1/6 once she must register | -£15,120 |
| What she keeps | £75,600 |
| Takings needed to keep £84,000 after VAT | £100,800 |
£84,000 x 1.2, a 20% riseOn the Flat Rate Scheme at 13% she would keep £78,926.40, or £79,833.60 at 12% in her first year of registration. As of Oct 2026.
Benchmarks for bills, staff costs, retail share, rebooking and no-shows should come from your own booking system, on one definition each time. If you compare yourself with the market, put the current NHBF Industry Statistics and the ONS business release side by side with their months, because NHBF counts chair renters and the ONS mostly does not.
Asked in Greymill
£20 of the £120 is VAT, and that is owed to HMRC.
Net price: £120 x 5/6 = £100, at the 20% standard rate (As of Oct 2026)
Commission: 40% x £100 = £40
Product: £10
Left for your fixed costs: £50, half the net price
Pay 40% of £120 and they get £48, leaving you £42. That extra £8 a colour hands them a share of VAT you still have to pay.
Put it in writing: each stylist's terms should say commission is paid on the price without VAT.
Want me to run the same check across your whole menu?
Ask it about your own business
Paste this into Greymill with your own figures, and Cash & Profit works it through for your business.
I run a salon or beauty business in the UK. Here are the last [4 weeks] from my booking system: rostered and booked hours per stylist [hours], takings by service [figures], product cost per service [figures], our commission terms [rate and what it is paid on], and whether I am VAT-registered [yes or no, and my rolling 12-month takings]. Work out utilisation and column productivity for each stylist, show which services are underpriced on the cost and time formula, suggest new VAT-inclusive prices to take effect before the next 1 April, and tell me whether the rise would take me over the VAT registration threshold.
More for beauty, hair and aesthetics in the UK
- December was busy, so why is there no cash in February?Voucher, course and deposit money is service you still owe, no-shows are column hours you never get back, and a 13-week cash view shows both before they bite.Read the lesson
- Rent-a-chair and VAT: could HMRC say every stylist's takings are mine?Chair rent is VAT-able, and if the salon in reality supplies the haircut, every self-employed stylist's takings count towards your VAT turnover.Read the lesson
- Adding microblading, piercing, laser or lip filler: what do I need before the first client?Every salon has safety duties, and a treatment that breaks the skin, uses a laser or involves a prescription-only medicine adds licensing, age rules and insurance duties that differ in each of the four nations.Read the lesson
- Deposits, no-show fees and course packages: what can I actually keep?Booking terms only hold if clients see them before booking, they are fair, and they respect the rules on cancellations, courses, memberships and prices.Read the lesson
- Commission-only stylists, self-employed barbers and card tips: am I breaking the law?How you pay and organise your team decides whether they are workers owed the minimum wage and holiday pay, and in Great Britain the tips law covers every tip your workers receive, card tips included.Read the lesson
- Filling the book from Instagram, reviews and rebooking without breaking the advertising rulesRebooking, reviews and social portfolios fill a salon's diary, and each comes with its own rules on photos, influencers, reviews and prescription medicines.Read the lesson
- A client has reacted, been burned or had a filler complication: what do I do today?The first hours after a reaction, burn or injectable complication decide the client's outcome and whether your insurance responds, so act in the right order and admit nothing.Read the lesson
Open the interactive lesson · Every beauty, hair and aesthetics lesson · What Greymill knows about the trade
Sources
The primary sources behind this lesson, checked Oct 2026.
- annual release, SIC 2007 class 96.02 (Pricing, margins and market sources)
- rates and thresholds 2026 to 2027 (Worked examples in pounds)
- BRIL 5/2025 para 3 (Worked examples in pounds)
- ERA 1996 s.1 (Staff contracts, covenants and client lists)
- TULRCA 1992 s.207A (Staff contracts, covenants and client lists)