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i The advice on this page applies to residents in England and Wales only.

Self-employed debt advice

Self-employed or sole trader debt advice

Running a small business is a lot of pressure. Juggling professional costs, household bills and personal debts makes it difficult to know what to pay first.

Setting up a business? Working out costs? We have resources to help you.

Am I a sole trader?

This table shows the difference between a sole trader and a limited company:

Sole trader Limited company
You run your business on your own. Directors run the company, which means you are an employee of your own company.
You are personally responsible for the debts and costs of the business. The company is responsible for business finances and debts.
If you cannot pay the business debts, you are personally responsible. Your personal income and assets are at risk. If you cannot afford the business debts, you are not personally responsible unless you signed a personal guarantee.

Which business costs do I need to pay first?

Some are more important than others.

This list shows what can happen with different types of unpaid debt:

Type of debt Consequence of non-payment
Mortgage or secured borrowing on business premises Losing your business premises
Business rent arrears Eviction or a visit from bailiffs
Business rates A visit from bailiffs or imprisonment
Unpaid fines A visit from bailiffs or imprisonment
Tax, VAT or National Insurance A visit from bailiffs, bankruptcy or imprisonment
County court judgments A visit from bailiffs or a charging order
Equipment leases Repossession
Water, gas & electricity bills Disconnection

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I have fallen behind with my tax

Contact HMRC if you have unpaid:

  • Income Tax
  • VAT
  • National Insurance

Make sure to update them if you are struggling. They may think you are not paying on purpose.

  1. Check that HMRC are asking you for the right amount
  2. Make sure they have correct details of your business takings and costs. The tax bill may be overestimated
  3. Offer to pay the debt at a rate you can afford

We can help you work this out.

Even if your offer is later refused, start paying what you can afford straight away.

What happens if I do not pay my tax, VAT or NI?

HMRC can take your goods without a court order for unpaid tax.

They will want you to repay your debt as soon as possible.

  • Contact the office you most recently heard from
  • Explain your situation
  • Try to set up an arrangement

They may let you pay in monthly instalments if they agree you cannot afford a lump sum.

Failure to contact HMRC can result in:


HMRC enforcement agents (bailiffs) can take stock and equipment from your business or goods from your home.

They can sell these items to clear your debt.

They do not need a court order to do this.

They can force entry to your business, but they need court permission to enter your home.

This is rare. They will sooner use another collection method like making you bankrupt.

County Court action

They could get a County Court judgment (CCJ) against you.

  1. You will get some blue and white court forms
  2. Fill these in and offer an affordable monthly repayment amount
  3. Find out more about this in our CCJ section

If you do not pay the CCJ, they can:

  • Use enforcement methods such as bailiffs (enforcement agents)
  • Apply for a charging order to attach the debt to your property

Magistrates' court hearing

HMRC can send you a hearing summons if you owe less than £2000.

Bring your business and household budgets to offer payment instalments.

If you do not pay the instalments:

Another hearing is arranged to decide if you are guilty of either:

  • ‘Wilful refusal’- You have the ability to pay but refuse on principle
  • ‘Culpable neglect’- You have the money but ignore the debt

The court decides whether to send you to prison.

It cannot write off your debt.


HMRC can start bankruptcy proceedings if you owe more than £750.

Find more details about this on our bankruptcy from creditors page.

Take money from your wages

HMRC can alter your tax code to collect a debt. This increases the tax deducted from your wages.

  • If you earn less than £30,000, they can collect up to £3,000
  • If you earn over £90,000, they can collect up to £17,000
  • If you earn between these numbers, they can collect between £3,000 and £17,000

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I am self-employed and struggling to pay my bills

Contact Business Debtline if you are:

  • Self-employed
  • Looking for help with your debts
  • Living in England, Wales or Scotland

Business Debtline is run by the national charity, Money Advice Trust. It is completely free, confidential and independent.

Business Debtline offer practical self-help to small business owners and people who are self-employed.

If you contact Business Debtline, they can:

  • Give advice on debts such like tax and business rates
  • Provide support if creditors take court action
  • Help review business finances
  • Help decide the next steps to take
  • Advise on how best to recover debts from other people
  • Advise on how to close a business if you need to
  • Advise on personal debts
  • Help you to budget

Their website has:

  • Guides
  • Fact sheets
  • Sample letters
  • A business and household budget tool
  • Webchat service

In Northern Ireland, contact Advice NI for free, independent and impartial advice on debts.

They offer telephone based advice and solutions for:

  • Sole traders
  • Partnerships
  • Limited companies
  • Trading and former trading businesses