Author: Glenn

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.

If you turned 18 on or after 1 September 2020, there may be cash waiting for you in a dormant Child Trust Fund (CTF).

If your children recently turned 18 you should check to see if they have claimed the money, to which they are entitled.

Children born after 31 August 2002 and before 3 January 2011 were entitled to a CTF account with the government contributing an initial deposit, usually of at least £250. These funds were invested in long-term saving accounts for newly born children. HMRC has confirmed that there are many thousands of teenagers that have turned 18 and not yet claimed the cash to which they are entitled.

An estimated 6.3 million CTF accounts were set up throughout the duration of the scheme. If a parent or guardian was unable to set up an account for their child, HMRC opened a savings account on the child’s behalf.

If you are over 18 and already know who your CTF provider is you can contact them directly to access your cash. This might be a bank, building society or other savings provider. If this information has been lost or is unavailable, then you can check and track down your provider online using a simple online tool created by HMRC.

Most self-employed people are required to pay Class 4 National Insurance contributions (NICs) if their profits are £12,570 or more a year. Class 4 NIC rates for the tax year 2024-25 are 6% for chargeable profits between £12,570 and £50,270 plus 2% on any profits over £50,270.

A number of categories of people are exempt from paying Class 4 NICs, these include:

• People under the age of 16 at the beginning of the year of assessment.
• People over State pension age at the beginning of the year of assessment. A person who attains State pension age during the course of the year of assessment remains liable for Class 4 NICs for the whole of that year.
• People receiving profits in their capacity as a trustee, executor or administrator of a person liable to tax.

The mandatory payment of Class 2 National Insurance Contributions (NICs) for the self-employed was abolished effective from 6 April 2024. It can be beneficial for some self-employed people who do not pay NICs through self-assessment to make voluntary Class 2 NICs. This can help them access certain contributory benefits including the State Pension. It is important to confirm that this would be beneficial before making any voluntary payment. The current weekly rate for making voluntary Class 2 NICs is £3.45.

When a new employee is added to the payroll it is the employers' responsibility to ensure they meet the employees’ rights and deduct the correct amount of tax from their salary. This includes any employees who are family members.

It is possible to employ young people if they are 13 or over but there are special rules regarding how long they can work and what jobs they can undertake. Children younger than 13 can work in certain areas such as television, theatre and modelling but their employer will need to apply for a child performance licence. There is no National Insurance liability for children under 16 and they would only need to be included on an employer’s payroll if their total income is over their Personal Allowance.

Young workers (aged 16 to 17) are subject to different National Minimum Wage rates. The current minimum hourly rate for this age group is £6.40. Any payments to young workers need to be handled through the payroll. If the workers earn more than £123 a week, then the employer will also need to do undertake regular PAYE tasks like making deductions.

There are different rules if you take on volunteers or voluntary staff, but the employer is still responsible for health and safety and must give inductions and training in the tasks they are going to do.