Being self-employed brings freedom, but it also brings an uneven income, tax bills that land in one lump, and the worry that dealing with debt might mean losing the business you've built. The reassuring news is that there are debt solutions designed to let you keep trading while you get back on top of what you owe.
The key is to separate your personal and business finances in your mind, understand which debts are priorities, and get advice that takes account of how self-employment actually works.
The short answer
- Sole traders are personally liable for business debts, so business and personal debt are treated together.
- Tax arrears (Income Tax, National Insurance and VAT) are priority debts and need careful handling.
- An IVA can often let you keep trading while you repay what you can afford.
- HMRC may agree a Time to Pay arrangement to spread tax you can't pay in one go.
- Free, confidential advice is available, and understanding your options costs nothing.
Business and personal debt: how they connect
If you're a sole trader or in an ordinary partnership, there's no legal line between you and your business — you're personally responsible for its debts. That means a debt solution has to look at everything together: your business overheads, your household bills, and any personal borrowing. It also means the right solution can deal with both at once. Our detailed guide on IVAs for the self-employed explains how this works in practice.
Sort out priority debts first
Some debts carry heavier consequences than others and must come first:
- Tax and VAT — HMRC has strong collection powers, so arrears here are a priority.
- Rent or mortgage on your home or business premises.
- Council tax and business rates.
- Equipment on finance that you need to keep trading.
Non-priority debts, such as credit cards, business overdrafts and unsecured loans, still matter, but they don't carry the same immediate risks. If cards are part of the picture, our credit card debt help guide may be useful too.
Debt solutions that let you keep trading
An IVA
An IVA is often a strong fit for self-employed people because it can include tax arrears and business debts, freezes interest, and typically lets you carry on running your business throughout. You make one affordable monthly payment, usually for five or six years, and any remaining qualifying debt is written off at the end. To see whether it could work for you, start with our guide on whether you qualify for an IVA and read up on what debts can be included.
A debt management plan
If your debts are mostly non-priority and your income should recover, a debt management plan offers a flexible, informal way to pay one reduced amount each month. It's easy to adjust as your trading income rises and falls, though it isn't legally binding and interest isn't guaranteed to stop.
Other routes
Depending on how much you owe and whether you have assets, a debt relief order or, in more serious cases, bankruptcy might be considered. Bankruptcy doesn't automatically end self-employment, but it can affect certain business activities, so it's worth understanding fully before deciding.
Dealing with the ups and downs of income
One of the hardest parts of self-employment is that money arrives unevenly, which makes a fixed monthly debt payment tricky. This is one reason an IVA can suit sole traders: your payments are based on what you can genuinely afford after business costs, and they can be reviewed if your trading changes significantly. An informal debt management plan offers similar flexibility, letting you pay less in leaner months and more when work picks up. The important thing is to agree something realistic rather than promising a figure you can't sustain when a quiet month comes along.
Plan for the tax you'll owe next
One of the traps of self-employment is spending money that's really owed to HMRC. Once you're back on track, setting aside a percentage of every payment for tax and National Insurance in a separate account can stop arrears building up again. Keeping clear records also makes it far easier to prove your income if you ever need to arrange a debt solution, and it gives you an honest view of how the business is really doing month to month.
How IVA Advice Online can help
We know self-employed finances aren't as tidy as a monthly payslip, and we'll take the time to understand how your business actually works before suggesting anything. Our advice on your options is always free, and we'll only mention a fee if you choose a solution that carries one. If you'd like to talk through keeping your business going while you tackle your debts, get in touch and we'll help you find a way forward.