Author: Glenn

Self-assessment taxpayers are usually required to pay their Income Tax liabilities in three instalments each year. The first two payments are due on 31 January during the tax year and 31 July following the tax year.

These payments on account are based on 50% each of the previous year’s net income tax liability. In addition, the third (or only) payment of tax will be due on 31 January following the end of the tax year. If you think that your income for the next tax year will be lower than the previous tax year, you can apply to have your payment on account reduced. This can be done using HMRC’s online service or by completing form SA303.

It is important to note that you do not need to make any payments on account where your net Income Tax liability for the previous tax year is less than £1,000 or if more than 80% of that year’s tax liability has been collected at source.

There are no restrictions on the number of claims to adjust payments on account a taxpayer or agent can make. The payments are based on 50% of your previous year’s net income tax liability. If your liability for 2023-24 is lower than 2022-23 you can ask HMRC to reduce your payment on account. The deadline for making a claim to reduce your payments on account for 2023-24 is 31 January 2025.

If taxable profits have increased there is no requirement to notify HMRC although the final balancing payment will be higher.

Asking your accountant for advice offers a range of benefits, particularly in guiding both business and personal financial decisions. Here are some key advantages:

Expert Financial Guidance

Accountants are trained professionals with deep knowledge of tax laws, financial regulations, and best accounting practices. They can provide tailored advice on managing cash flow, budgeting, and financial planning to ensure your business remains financially healthy.

Tax Efficiency

One of the more significant advantages is receiving advice on how to reduce your tax liability legally. Accountants can help identify deductions, allowances, and tax reliefs you may be eligible for, ensuring you are not paying more tax than necessary.

Compliance with Laws and Regulations

Tax laws and regulations are constantly changing, and it can be challenging to stay updated. Accountants can ensure that your business complies with all relevant legislation, helping you avoid penalties, fines, and potential legal issues.

Business Growth Support

If you are looking to expand your business, accountants can offer strategic advice. They can help you analyse your financial data to make informed decisions, plan for future investments, and ensure that your business grows sustainably.

Risk Management

Accountants can assess financial risks associated with various business decisions and suggest ways to mitigate them. Their expertise helps in identifying potential financial pitfalls and ensuring you are prepared for unexpected expenses or downturns.

Improved Cash Flow

Proper cash flow management is crucial for any business. Accountants can advise on how to maintain healthy cash flow, ensuring you have enough liquidity to cover operational expenses and make investments when needed.

Financial Forecasting

Accountants can help you create financial forecasts and projections, which are vital for decision-making and securing financing. Their insights into future income, expenses, and profitability are invaluable for long-term planning.

Access to Professional Networks

Accountants often have a broad network of contacts in the financial, legal, and business communities. They can connect you with other professionals, such as solicitors or financial advisors, to further support your business.

If you feel you may benefit from support in any of these areas, please call, we can help.

Overtrading occurs when a business expands its operations at a pace that exceeds its available working capital and financial resources. This can happen when a company takes on more business than it can sustain without sufficient cash flow to support day-to-day operations.

Here are key points about overtrading:

1. Cash Flow Strain: Overtrading often leads to a cash flow shortage, as the business needs more funds to pay suppliers, cover increased inventory, and finance its operations. The gap between receiving payments from customers and paying suppliers can stretch too far.
2. Inventory Buildup: To meet increased demand, companies may overstock, tying up capital and cash flow to purchase goods that have not been sold.
3. Borrowing Pressure: To support rapid expansion, businesses may rely heavily on borrowing, leading to high-interest costs or increased debt, which further strains the company's finances.
4. Declining Service Quality: Overtrading can cause operational inefficiencies, leading to delays in fulfilling orders or a decline in the quality of products or services as the company struggles to manage increased demand.
5. Risk of Insolvency: If the business cannot manage the financial stress, it risks insolvency. For example, where it becomes unable to meet its short-term obligations, such as paying creditors or employees.

A common situation occurs in retail when a business takes on a large number of orders without sufficient stock or cash reserves to fulfil those orders, leading to delays, missed payments to suppliers, and financial instability.

Effective management of cash flow, maintaining adequate working capital, and carefully planning growth are crucial strategies to avoid overtrading.

1 October 2024 – Due date for Corporation Tax due for the year ended 31 December 2023.

19 October 2024 – PAYE and NIC deductions due for month ended 5 October 2024. (If you pay your tax electronically the due date is 22 October 2024.)

19 October 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2024. 

19 October 2024 – CIS tax deducted for the month ended 5 October 2024 is payable by today.

31 October 2024 – Latest date you can file a paper version of your 2023-24 self-assessment tax return.

1 November 2024 – Due date for Corporation Tax due for the year ended 31 January 2024.

19 November 2024 – PAYE and NIC deductions due for month ended 5 November 2024. (If you pay your tax electronically the due date is 22 November 2024.)

19 November 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2024. 

19 November 2024 – CIS tax deducted for the month ended 5 November 2024 is payable by today.

Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company, or an individual’s interest in a trading partnership. When this relief is available, a reduced Capital Gains Tax (CGT) rate of 10% is applied instead of the standard rate, potentially resulting in significant tax savings for those exiting their business.

To qualify for BADR, certain conditions must be met:

1. Sale of a Business or Business Closure:
   • you must be a sole trader or business partner;
   • you must have owned the business for at least 2 years leading up to the sale or closure; and
   • you must dispose of your business assets within 3 years to qualify.
2. Sale of Shares or Securities: Both of the following must apply for at least 2 years up to the date you sell your shares:

• You must be an employee or office holder of the company (or a company within the same group).
• The company’s main activities must involve trading, not non-trading activities like investment, or it must be the holding company of a trading group.

Additional rules can apply if the shares are from an Enterprise Management Incentive (EMI).

Currently, you can claim a total of £1 million in BADR over your lifetime, allowing you to qualify for the relief multiple times. The lifetime limit may be higher if you sold assets before 11 March 2020.