Self-Employed IVAs
If you're self-employed and struggling with debt, an Individual Voluntary Arrangement (IVA) could offer you a way forward while allowing you to continue trading.
Unlike bankruptcy, which can restrict your ability to run a business, an IVA is a more flexible debt solution designed to help you clear both personal and business-related debts over a fixed period, usually 5 to 6 years, while maintaining your income.
At NDH Financial, we're personal insolvency specialists with our own licensed Insolvency Practitioner in-house. We understand the unique challenges self-employed people face when managing debt, and we're here to help you find the right solution.
Why Choose an IVA Over Bankruptcy if You're Self-Employed?
For self-employed individuals, an IVA offers several advantages over bankruptcy:
Continue Trading Without Restrictions
Bankruptcy can make it more difficult for a sole trader to continue trading. A Trustee may refuse to allow you to operate in certain circumstances, and there are legal constraints on obtaining credit without disclosing your bankruptcy. An IVA allows you to continue running your business and earning an income, so you can keep making payments to your creditors.
Keep Your Business Assets
In bankruptcy, your assets, including tools, equipment, and stock, could be seized and sold, although tools of trade of a reasonable value are exempt. With an IVA, you can typically keep the assets you need to trade, subject to creditor approval. This means you can protect the essential items that allow you to continue earning.
Flexible Payment Arrangements
Self-employed income can be really unpredictable, but an IVA can be structured to account for seasonal variations or irregular earnings. You might propose a flexible payment plan that adjusts based on your cash flow, or you could repay a lump sum when a contract is completed or a property is sold.
Protect Key Suppliers
With creditor approval, your IVA can include provisions to exempt vital suppliers from being included in the arrangement. This means you can continue to pay them directly - or clear any arrears - to maintain essential relationships and keep your business running smoothly.
Deal with HMRC Debt
Historic tax liabilities, including unpaid self-assessment tax, VAT, and National Insurance, can be included in your IVA. Once your IVA is approved, you only need to keep up with current tax obligations regularly. However, HMRC will require all outstanding tax returns to be brought up to date before considering your IVA proposal. You can also include HMRC debt in your bankruptcy, and you will also need to ensure outstanding returns are submitted once the bankruptcy order is made.
Maintain Professional Standing
Unlike bankruptcy, an IVA won't appear on public records or in the London Gazette, helping you protect your professional reputation. You can continue to hold directorships and maintain memberships in professional bodies that may have restrictions for bankrupts, ensuring your business credibility remains intact.
What Debts Can Be Included in a Self Employed IVA?
A self employed IVA can cover most unsecured business and personal debts. These are debts that aren't secured against an asset.
Debts You CAN Include:
- Personal credit cards and store cards
- Personal and payday loans
- Overdrafts
- Business credit cards and trade accounts
- Supplier debts and unpaid invoices
- HMRC debts (income tax, VAT, National Insurance, tax credits)
- Business rates and rent arrears
- Personal debts you've personally guaranteed
- Utility bills (water, gas, electricity)
Debts You CANNOT Include:
- Secured loans (e.g. mortgages, vehicle finance)
- Student loans
- Child maintenance and CSA arrears
- Court fines and magistrate fines
- Debts arising from fraud
- Debts owed by a limited company (unless personally guaranteed)
Who can qualify for a self-employed IVA?
If you're self-employed in England, Wales, or Northern Ireland, you may qualify for an IVA if you:
- Owe £7,000 or more in unsecured debt
- Have regular income from your self-employment
- Can afford monthly payments after essential living and business costs
- Have at least two creditors
- Want legal protection & a clear path to becoming debt-free
There are no formal qualifying requirements for an IVA. However, your Insolvency Practitioner will review your circumstances and determine whether an IVA is an appropriate option for you. You would need to be in a position where you can make monthly repayments, although in some cases you can offer a lump sum instead.
Why Choose NDH Financial for Your Self Employed IVA?
- Specialist Insolvency Experts - We specialise exclusively in IVAs and personal insolvency solutions
- In-House Licensed Insolvency Practitioner - Direct access to qualified professionals who understand self-employment
- No Upfront Fees - All fees are included in your monthly IVA payments
- No Obligation Consultations - No-obligation advice to help you make the right decision
- Transparent Process - We'll explain everything clearly, with no hidden surprises
- Trusted Service - Helping self-employed individuals across England, Wales, and Northern Ireland become debt-free
Self-Employed Individual Voluntary Arrangement FAQs
If you're a sole trader or own a partnership, you can enter into an IVA for your personal and business debts. The IVA will cover debts you've personally guaranteed or taken on as a sole trader. However, if you own a limited company, the company's debts are separate legal entities and cannot be included in your personal IVA unless you've personally guaranteed them. In that case, only the personally guaranteed portion would be included.
You can become self-employed while in an IVA. However, you'll need to inform your Insolvency Practitioner as this represents a significant change in your circumstances. They'll need to review your new income and expenses to make sure your IVA payments remain affordable and realistic. Your Supervisor may need to contact your creditors to modify the terms of your arrangement if your income changes significantly. It's important to discuss this with your Insolvency Practitioner before making the transition to self-employment.
One of the main advantages of an IVA vs bankruptcy is that you can continue trading throughout the arrangement. You'll retain your business assets (subject to creditor approval) and can keep earning income, which is essential for making your IVA payments. There are no automatic restrictions on running your business.
However, you'll need to comply with the credit restriction (no credit over £500 without Supervisor approval) and keep your Insolvency Practitioner informed of any significant changes to your business circumstances.
Your Insolvency Practitioner will prepare a detailed income and expenditure assessment, including a projected cashflow for both your personal finances and your business. They'll review your business income (looking at accounts, invoices, and bank statements), business expenses (rent, stock, equipment, insurance, professional fees), personal living costs, and existing debt obligations.
The payment is calculated based on your disposable income, which is what's left after deducting essential business and living expenses. For self-employed individuals, payments can be structured to account for seasonal variations or irregular income patterns.
Under standard IVA terms, any windfall or unexpected income over £500 must be paid into the arrangement. This includes tax rebates from HMRC. The rebate would be distributed to your creditors as part of your IVA. You should inform your Insolvency Practitioner as soon as you become aware of any tax rebate so they can advise on how it should be handled within your specific arrangement.
If your business bank account is overdrawn and that overdraft is included in your IVA, you'll likely need to close that account and open a new one. The bank may freeze or close the account once they're notified of your IVA.
Even if your business account isn't overdrawn, some banks may still choose to close it when they learn you're in an IVA. It's advisable to open a new basic business bank account before your IVA is approved for continuity. Your Insolvency Practitioner can guide you through this process and help you understand which banks are more likely to accept customers in an IVA.
A self-employed IVA is simply an IVA tailored to the circumstances of someone who is self-employed.
The key distinctions are in how it's structured:
- It can include both personal and business debts (including HMRC arrears and trade creditors)
- Payment calculations account for irregular or seasonal income through projected cash flow statements
- Provisions can be made to protect essential suppliers
- There's flexibility to accommodate the unpredictable nature of self-employed income.
The legal framework and approval process remain the same - you still need 75% creditor approval, and the arrangement is still supervised by a licensed Insolvency Practitioner.
Your IVA will be listed on the Individual Insolvency Register, which is a public record available online. However, clients and customers are unlikely to check this register unless they have a specific reason to do so.
You're not legally required to inform clients or customers about your IVA unless your contracts with them specifically require you to disclose insolvency proceedings, or you have listed them as a creditor. That said, if you work in certain regulated professions, you may have disclosure obligations to your professional body or licensing authority.
Take Control of Your Debt and Start an IVA Today
If you're self-employed and struggling with debt, contacting a licensed Insolvency Practitioner is a good place to start. They'll take the time to understand you and your business, explain how they can help, and outline the benefits and drawbacks of each option - including an IVA - so you can make an informed decision about how to resolve your financial situation.
At NDH Financial, we're here to help you find the right path forward. Contact us today for a no-obligation consultation.
An IVA may not be suitable in all circumstances. Fees apply. Your credit rating may be affected
