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Self-employed and in debt

If you are a sole trader, your business debts are your personal debts. Here is how to protect your home and income, deal with HMRC, and keep trading if you can.

Applies to: England, Wales & Northern Ireland

Written by The My Debt Cleared editorial teamLast reviewed 18 October 2026Next review 18 April 2027Jurisdiction England, Wales & Northern IrelandEditorial policy
Sole traders and partners are personally responsible for business debts, so a supplier or HMRC can pursue you personally. Limited company directors are usually only liable for company debts they have personally guaranteed. Deal with HMRC early — it can agree a Time to Pay arrangement for tax you cannot pay on time — and treat business rates and VAT as priority debts.

What to do now

  1. Separate business and personal debts in Find My Debts.
  2. Contact HMRC before a payment deadline if you cannot pay — ask for Time to Pay.
  3. Do a budget that covers your household first, then the business.

Are business debts personal?

  • Sole trader or partnership: yes, all business debts are yours.
  • Limited company: usually no, unless you signed a personal guarantee, took an overdrawn director’s loan, or there was wrongdoing.

HMRC

HMRC can agree a Time to Pay arrangement if you cannot pay tax in full on time, usually for tax you owe up to a set limit online and more by phone. It has strong collection powers if you do not engage, so contact it before a deadline. HMRC debt.

Formal solutions and self-employment

You can usually keep trading in an IVA, and sometimes in bankruptcy, though business assets may be affected. A DRO has strict limits including on assets. IVAs for the self-employed.

You can get free, impartial debt advice

You never have to pay for debt advice. MoneyHelper (government-backed), StepChange, National Debtline and Citizens Advice all give free, confidential advice with no obligation.

Common questions

Am I personally liable for my business debts?

If you are a sole trader or in a partnership, yes. If you run a limited company, usually not, unless you gave a personal guarantee.

Can I pay HMRC in instalments?

Yes, HMRC can agree a Time to Pay arrangement if you cannot pay in full. Contact it before the payment is due if you can.

Can I keep trading in an IVA?

Usually yes. Many self-employed people keep trading during an IVA, paying from their business income.

HMRC debtIVA for the self-employedBudget calculator
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