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Personal Care Services: Self-employed

Answer

This Government is committed to ensuring that the tax system operates fairly and efficiently and creates a level playing field for compliant businesses. Most businesses pay what they owe but a minority fail to register with HMRC or only declare a portion of their earnings.

VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. At £90,000, the UK has one of the highest VAT registration thresholds in the OECD, meaning the majority of businesses are not in the VAT system.

The VAT registration threshold applies to individual businesses. As a result, businesses structured differently – such as those employing staff directly and those made up of self-employed individuals – may have different VAT obligations depending on their individual turnover. We consider the impacts on small businesses as well as the wider economy and public finances as part of the policy making process.

HMRC is committed to robustly tackling false self-employment and will investigate evidence that suggests companies may have misclassified individuals for tax purposes. In these cases, HMRC will identify the facts and take steps to ensure the correct tax and National Insurance Contributions are paid, along with any interest and penalties due. Where National Minimum Wage underpayments are identified, HMRC takes appropriate enforcement action on behalf of the Fair Work Agency (FWA).

The Government recognises the important social and economic role of the hair and beauty sector, which not only contributes to people’s well-being, but also plays a vital role in supporting local economies across the country. We have published GOV.UK guidance and YouTube videos on tax obligations specific to this sector to enhance understanding and enable businesses to comply with their tax obligations. The latest guidance was published in May 2025; this included the Check Employment Status for Tax tool (CEST).

Secondary information

Type

Written question

Reference

12130

Session

2026-27

Grouped for answer

Yes

Subjects

Personal care services Taxation Self-employed

Contains statistics

Yes

Link

View this Written question on www.parliament.uk