Debt Help When You're Self-Employed
Being self-employed and in debt is uniquely stressful — your income fluctuates, you may owe HMRC, and your business is at stake. But there are specific protections and strategies available to you.
HMRC Debt — Time to Pay
If you owe HMRC (Self Assessment, VAT, or PAYE), you can request a Time to Pay arrangement:
- Call HMRC's Payment Support Service: 0300 200 3835
- Explain your situation and propose a payment plan
- Plans are usually 6–12 months but can be longer
- Interest is charged but penalties may be reduced
Important: Contact HMRC before the deadline, not after. They are far more lenient with proactive taxpayers.
Protecting Your Business
If you're struggling but the business is viable:
- 1Separate business and personal debts — understand which you owe personally
- 2Consider becoming a limited company — this separates your personal liability
- 3Negotiate with suppliers — most prefer a payment plan to losing a customer
- 4Check if you're owed money — chase outstanding invoices urgently
Benefits for Self-Employed People
You can claim Universal Credit if:
- Your income has dropped significantly
- You're in your first year of trading (no Minimum Income Floor applies)
- After year one, a Minimum Income Floor may be applied
Self-Employed and Can't Pay Bills
Priority order:
- 1Rent/mortgage — keeps your roof
- 2Council tax — priority debt with serious consequences
- 3HMRC — they have strong enforcement powers
- 4Energy bills — hardship funds available
- 5Credit cards/loans — contact and request hardship treatment
Frequently Asked Questions
Can HMRC take my tools or equipment?
HMRC can instruct bailiffs, but tools of your trade up to £1,350 are protected. If your equipment is essential for your business, make this clear in any correspondence.
Will Universal Credit affect my self-employment?
After your first year of trading, UC applies a 'Minimum Income Floor' — they assume you earn at least the National Minimum Wage for your expected hours, even if you actually earn less. This can reduce your UC amount.
Related Guides
Financial Help After Redundancy
Practical steps to take after being made redundant. From immediate benefits to debt management — a clear, calm guide to your options.
Can't Afford Your Energy Bills
Struggling with gas or electricity bills? Guide to energy hardship funds, payment plans, Warm Home Discount, and fuel vouchers in the UK.
Sources & Further Reading
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