How much to set aside for taxes as a beauty pro
A method for self-employed nail techs, lash artists and stylists to set aside tax from profit, with a worked example. Rules vary, so confirm with an accountant.
Set aside a share of your profit, not of what clients pay you. Divide last year's total tax bill by last year's profit to find your own effective rate, move that share of each month's profit into a separate account, and ask an accountant to confirm the figure. In your first year, get an estimate before you start.
This post explains a method, not a rate. Tax rules differ between countries, states and provinces, and they change. Nothing here replaces advice from an accountant or tax professional who knows where you live and how your business is set up.
Why do self-employed beauty pros need to set money aside?
#Because nobody does it for you. An employer takes tax out of each paycheck before the money reaches you. When you work for yourself — renting a booth, running a studio, working from home — clients pay you in full, and the tax on that income is your job to pay later.
"Later" often means during the year, not just once at the end. Many countries expect self-employed people to pay in advance once their tax bill passes a certain size:
| Country | How advance payments work | Official guidance |
|---|---|---|
| United States | Estimated tax, paid in four periods through the year, generally required if you expect to owe $1,000 or more | IRS: estimated taxes |
| United Kingdom | Payments on account due by 31 January and 31 July, each half of last year's bill, unless last year's bill was under £1,000 | GOV.UK: payments on account |
| Canada | Instalments, required when your net tax owing passes a threshold set by the CRA | CRA: who has to pay instalments |
| Australia | PAYG instalments, usually paid quarterly once you enter the system | ATO: PAYG instalments |
Thresholds and dates change, so check the official page for the current year. In the US there is also a separate self-employment tax for Social Security and Medicare, which the IRS puts at 15.3% and which is owed on top of income tax.
The practical point is the same everywhere: if the money is not already put aside when a payment is due, it has to come out of whatever you have that week.
Should you set aside a percentage of revenue or profit?
#Profit, if you can. Income tax is generally charged on your profit — what clients paid you minus the allowable costs of running the business — not on everything that came in. If you set aside a percentage of revenue, you are usually saving tax on money you already spent on rent and products.
A percentage of revenue is simpler, because you can do it the moment you are paid, and some people prefer it for exactly that reason. It works, as long as the percentage is set from your real numbers rather than borrowed from someone else's. It will just need to be lower than a profit-based percentage to land in the same place.
How do you work out your set-aside percentage?
#Use your own history, and let your accountant check it.
If you filed last year: add up every tax you paid on last year's business income — income tax plus any self-employment tax or social contributions — and divide by last year's profit. That is your effective rate: the share of your profit that actually went to tax.
Effective rate = total tax on last year's business income ÷ last year's profit
For example, and purely as an illustration: a profit of $38,000 with a total tax bill of $7,600 gives an effective rate of 20%. Your own figure could be quite different, because it depends on where you live, your other income, your household and the deductions you are entitled to.
If this is your first year: you have no return to work from. Ask an accountant for an estimate based on what you expect to earn, or use your tax agency's own estimating tools. Until you have a real figure, err on the high side — finding you have saved too much is a pleasant surprise; finding you have saved too little is not.
If your income changes a lot: recalculate part-way through the year. A rate based on a quiet year will fall short in a busy one, because in many systems the rate rises as income rises.
Some people add a small buffer on top of their effective rate, so there is room for a better year than expected. That is a reasonable habit, and it is a question worth putting to your accountant.
A worked example: one month of set-aside
#Here is how the method looks for one month, using the illustrative 20% from above.
| Line | Amount |
|---|---|
| Revenue from clients (including tips) | $5,200 |
| Products and supplies | − $520 |
| Rent | − $900 |
| Other costs (insurance, software, phone, card fees) | − $380 |
| Profit | $3,400 |
| Set aside for tax (20% of profit) | − $680 |
| Safe to spend | $2,720 |
The $680 moves to a separate account the day you do the sum. The $2,720 is what the month actually paid you. It is often a smaller number than the one in your head, which is exactly why it is worth seeing.
Doing this monthly is enough for most people. If your income is lumpy, or you find the money disappears before the end of the month, do it weekly instead.
Where should the tax money live?
#In a separate savings account that you do not spend from. Not your everyday account, and not a mental note. Money that sits next to your spending money gets spent, especially in a slow month when rent is due and the tax bill feels a long way off.
Label it plainly — "tax" — and treat it as money you are holding for someone else, because you are. If the account pays interest, that is a small bonus.
It also helps to see the reserve next to the rest of your numbers. iBeauty has wallets for tax, savings and other reserves: it does not hold the money — your bank does — but it keeps what you have put aside visible alongside what you earned and spent, so it never quietly becomes spendable in your head.
What about sales tax, VAT or GST?
#That is a different tax, and it needs its own treatment. In some places, once your turnover passes a registration threshold, you have to charge a sales tax such as VAT or GST on your services and pass it on to the tax agency. That money was never yours: if you are registered, set aside the full amount you collect, separately from your income tax reserve. Whether it applies to you, and from when, depends on where you work — ask your accountant.
What records make tax time easier?
#The better your records through the year, the less a tax return costs you in time, stress and accountant's fees. Keep:
- Every payment from every client, with the date and how it was paid — cash, card or transfer.
- Tips, recorded as they come in. How tips are taxed depends on where you live, and in some places the rules have changed recently, so check with your accountant how to report them.
- Every business cost, with the receipt: products, rent, insurance, education, equipment.
- Recurring bills, so a monthly cost does not go missing from the year's total.
- What you set aside and when, so you can match it against what you pay.
A monthly or yearly total of revenue, costs and profit is the first thing an accountant will ask for. If you can hand it over already added up — along with a clean export of the entries behind it — the conversation is shorter and cheaper.
What if you have not set anything aside?
#Start now, with this month's profit, and talk to an accountant as early as you can. The sooner you know roughly what you owe, the more options you have. Many tax agencies offer ways to pay over time if you cannot pay in full, but they work best when you ask before a deadline rather than after it.
Key takeaways
#- Set aside a percentage of profit, not revenue, if you can.
- Work out your own effective rate from last year's return: total tax divided by profit.
- In your first year, get an estimate from an accountant and err high.
- Move the money to a separate account on a fixed day, monthly or weekly.
- Sales tax, VAT or GST, if you are registered, is a separate reserve of its own.
- Keep every income and cost record through the year, and confirm everything with an accountant where you live.
Frequently asked questions
#How much should a self-employed nail tech or lash artist set aside for taxes?
#There is no single percentage that is right everywhere. A reliable method is to divide last year's total tax on your business income by last year's profit to find your own effective rate, then set aside that share of each month's profit. In your first year, ask an accountant for an estimate and err on the high side.
Should I set aside taxes from my revenue or my profit?
#Profit is more accurate, because income tax is generally charged on profit after allowable business costs, not on everything clients pay you. Setting aside a percentage of revenue is simpler and works too, but the percentage needs to be lower to land in the same place.
Do self-employed beauty professionals have to pay tax during the year?
#In many countries, yes, once the tax bill passes a certain size. The US uses quarterly estimated tax, the UK uses payments on account in January and July, Canada uses instalments and Australia uses PAYG instalments. Thresholds and dates change, so check your tax agency's official guidance.
Where should I keep money set aside for taxes?
#Keep it in a separate savings account that you do not spend from, labeled for tax. Money left in your everyday account tends to get spent, especially in a slow month.
Are tips taxable for beauty professionals?
#How tips are taxed depends on where you live, and in some places the rules have changed recently. Record every tip as income as it comes in, and ask your accountant how they should be reported.
iBeauty is an app for independent beauty professionals that records every visit, tip and cost, shows your monthly profit, keeps tax and savings reserves visible in wallets, and exports your entries to CSV for your accountant. The first month is free.