Self-Employed Debt Help

Running your own business takes dedication and hard work. When money gets tight, balancing your bills with your daily work becomes a huge challenge.

You don’t have to face this alone. You can get free and confidential advice from our friendly advisors today. We can help you review your personal budget and business cash flow to determine the best options for your situation.

This gives you a clear way forward so you can focus on what you do best: running your business.

How your business type affects your debt

The way you deal with business debt depends on how your company is set up. The law treats different types of businesses in very different ways.

Sole Traders: If you’re a sole trader, the law sees you and your business as exactly the same thing. This means you are personally responsible for all your business debts.

If you signed a government bounce-back loan during COVID, you’re still personally responsible for the loan.

If you cannot pay your business expenses, the people you owe money to can ask you to pay from your personal bank account.

Your creditors could even look at personal items, like your house or car, to recover the money, as they would if you owed money on a personal overdraft.

Business Partnerships: A business partnership is when two or more people run a business together. In a standard partnership, all partners are responsible for the firm’s debts. This is known as joint and several liability.

A creditor can chase any single partner for the full amount owed, not just their share. The only main exception is income tax, where you are usually only responsible for your own share.

Limited Companies A limited company is completely separate from the people who run it. If the company struggles with debt, the directors and shareholders are not usually personally responsible. However, your personal money could be at risk if you have signed a personal guarantee for a business loan or if you owe the company money through a director’s loan this does not apply for Government Bounce Back Loans issued during the COVID-19 pandemic.

Which bills should you pay first?

Not all debts are the same. Some are much more urgent. We call these priority debts. A priority debt is a bill with serious consequences if unpaid, such as rent, your mortgage or council tax. For self-employed people, HMRC tax bills are also a major priority.

If you do not pay HMRC, they have special powers to collect the money. They can sometimes take things from your business without asking a court first. Always try to pay your priority bills before things like credit cards or personal loans.

If you’re concerned about being able to meet your priority payments, then speak to our advisors today for free advice.

Can I keep trading with business debt?

Yes. A common concern is whether you have to close your business if you ask for debt help. But there are solutions out there designed to keep you trading and protect your livelihood.

One of the main options is a self-employed Individual Voluntary Arrangement. We call this an IVA. An IVA is a legally binding agreement to repay what you can afford each month. It usually lasts for five or six years. After that, any remaining unsecured debt is written off.

A self-employed IVA is very flexible:

• For sole traders: It can combine both your personal and business debts into one monthly payment.
• For fluctuating incomes: If your income goes up and down during the year, your payments can be adjusted to match your cash flow.
• Asset protection: It protects your essential business tools and equipment so you can keep working.

Note: If you are in a partnership, the business itself might need a Partnership Voluntary Arrangement, but individual partners can still use an IVA for their own liabilities. IVAs have eligibility criteria; for more information, speak to our advisors.

What other help is available?

An IVA is not the only solution that may be available to you. Depending on your income and how much you owe, our advisors may suggest other routes, such as:

• Debt Management Plan: An informal agreement to make reduced monthly payments.
• Debt Relief Order: A way to clear debt if you have little to no disposable income and very few assets. Eligibility criteria apply.

Let us help you find a way forward

Get free, confidential advice online or call 0800 316 1833 to speak to one of our experts. We’re here to help you understand your options and find a practical solution.

Related Self-Employed Advice and Support

• Business Debt Videos
• Business Debt Case Studies