On Wednesday 30 October 2024, Chancellor Rachel Reeves announced the Autumn Budget in the House of Commons.
The Autumn 2024 Budget presents both opportunities and challenges for hairdressers and small businesses in the personal services sector.
Toby Dicker, founder of the Salon Employers Association recently appeared on Sky News ahead of the Chancellor’s announcement stating, “The government is still not listening,” adding that an increase in labour costs will impact his business by tens of thousands. “Hairdressing businesses are affected five times more than other businesses because of the way. For us, it means it's no longer affordable to have apprentices and even employees. Governments have been misinformed about our industry for a long time and they aren't listening to us."
Keep scrolling to see the rest of the industry's reaction to today's Budget...
In their manifesto, Labour’s plans for economic growth included specific support for small businesses, commenting that “small firms, entrepreneurs, and the self-employed face unique challenges.” And calling them: “The lifeblood of communities and high streets across the country.”
A breakdown of the key factors that will impact hairdressers and the hair industry include:
Minimum Wage Increase: The government has announced a hike in the minimum wage, set to rise to £12.21 from April 2025 per hour for workers over 21. This will impact hairdressers directly by increasing payroll expenses. Salons will need to manage higher operational costs, potentially passing some of this cost on to customers or finding ways to improve efficiency to maintain profitability.
National Insurance (NI) Freeze for Employees: The Chancellor has committed to not raising NI rates for employees, aligning with Labour’s manifesto promise to avoid direct tax increases on working individuals. This freeze does not apply to employers Reeves announces that employers' National Insurance contributions will rise from 13.8% to 15%. The threshold at which businesses start paying National Insurance on a workers' earnings will be lowered from £9,100 to £5,000. Reeves is however increasing Employment Allowance to help smaller businesses. The Employment Allowance will increase from £5,000 to £10,500, which the chancellor says will mean 865,000 employers won’t pay any National Insurance at all next year.
Tax Simplification and Digitalisation: The budget emphasises tax simplification and increased digitalisation, which could benefit barbers by streamlining tax compliance and potentially reduce the administrative burden that many can find overwhelming.
Business rates: Business rates were also updated to continue supporting small businesses and address economic pressures. Key measures include maintaining the small business rates multiplier at 49.9p for properties with rateable values under £51,000, which helps limit rate increases for small enterprises. The national business rates multiplier will see an increase to 54.6p, reflecting inflation adjustments.
Corporation Tax Capped: Corporation Tax will stay capped at 25 and VAT rates are not anticipated to change, offering some predictability to salon owners in their pricing and customer charges.
The Industry's Reaction
Clive Collins, HOB Salons
"We’ve seen a 6.7% increase to NMW and an unbelievable 16% to under 20's and Apprentices. In real terms, with the increase in ERNI that will be charged because the threshold will not change, this is a 9% increase for those over 21. The 1.2% increase in employers NI will cost us as a business an increase of £50,000. Overall a disastrous budget for small businesses.”
Noel Halligan, NOCO Hair Bristol
“There’s a lot of information which will take a while to get our heads around it. Overall it isn’t great: National Insurance on a workers' earnings will be lowered from £9,100 to £5,000, so it feels like small businesses just won’t be able to employ as many people. Retail leisure and hospitality will receive 40% business rates relief which is ok but not sure that will save some salons.”
Benjamin Shipman, The Hair Movement, Sidcup
"As a business owner, I found the 2024 budget completely off-balance and can’t see how it will stimulate the economy. The 1.2% increase in employers’ National Insurance and changes to the threshold, aimed at raising an extra £25 billion, just add more hoops for salons trying to bring new talent on board. This may nudge more of the industry towards rent-a-chair models and self-employment—which isn’t necessarily a bad thing, but it’s a reality the industry will need to adapt to and fully embrace.
There are, of course, knock-on effects. The £40 billion tax hike will likely impact consumer confidence, just as many salons were finally seeing clients return to a 6–8-week appointment cycle. Now, I wouldn’t be surprised if we go back to a more cautious 8–12 weeks—or, in some cases, lost clients altogether. Over the next 12 months, salons will need to step up their game to attract new guests to fill these gaps. I reckon many salon owners will read this budget and feel a bit deflated.
That said, for us at The Hair Movement, the impact should be minor. We made adjustments earlier this year in anticipation of a new government and its budget changes. But I do feel for the salon owners who may be caught a bit off guard by these shifts."
Caroline Larissey, Chief Executive of the National Hair & Beauty Federation
‘We asked the government for support for employers to counteract rising wages so we’re pleased that they have listened and responded with a rise in the Employment Allowance which will benefit some sector businesses, despite the rises to employers National Insurance contributions.
However, with 16%+ rises in the youth wage rates there was nothing on interim support for businesses training young people. The only ‘youth guarantee’ for our sector will be that small and micro employers won’t be able to afford to take on apprentices. This makes it even more vital that Skills England is responsive to the needs of our sector and the new Growth & Skills levy channels major support to incentivise small and micro businesses training apprentices.
We will engage constructively with the consultation around business rates reform and the decision to keep at least some support through a 40% Retail business rates discount and freeze of the small business multiplier is welcome and important in the interim. The government was silent on VAT but we will continue to push for reform which is the sector’s number one issue.
While the Employment Allowance increase offers some breathing room, the dramatic rise in apprentice wages threatens to disrupt the traditional pathway into our Sector. Without targeted intervention, we risk creating a skills gap that could take years to bridge. The government's approach to retail business rates shows they're listening, but more comprehensive support is needed to ensure the sustainability of apprenticeships in hair and beauty."
