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At a glance: How to deal with debts when you stop being self-employed.
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This summary is not relevant in England and Wales
For a version of this summary that covers England and Wales, please click here.

This information is about business debts that self-employed people often have. It covers debts that you may have when you stop trading. This is not information about debts owed by limited companies.

Tax and National Insurance

HM Revenue & Customs (HMRC) collects income tax, National Insurance and value added tax (VAT). If you owe money to HMRC they are likely to act more quickly than some other creditors. You may need to treat a debt to HMRC as a priority. This depends on whether HMRC action will have serious consequences for you.  

HMRC action could include: 

  • If you are working for an employer HMRC may change your tax code, so they can take the debt from your wages before you get them. 
  • HMRC could ask the sheriff court to grant a summary warrant. This is a court order which confirms that you owe HMRC money. 
  • HMRC could also try to sequestrate you (make you bankrupt). They are more likely to do this if you have a house or other assets which could be sold to raise money. 

Business rates

Business rates are a tax you pay to your local council. You pay business rates on premises like shops, restaurants and workshops. If you have stopped trading, tell the council straight away. You may still be responsible for paying business rates if you are still leasing premises, even if they are empty. 

Gas and electricity arrears

If you traded from home there may be a risk of being disconnected at home because of gas or electricity arrears from when you had your business. You may need to treat the arrears as a priority debt. This means paying your current bill and making an offer to pay extra to clear the arrears. 

Water rates

You cannot be disconnected at home if you have unpaid business water rates bills. The water company may make a claim through the sheriff court to get a court order saying what you owe and how it should be repaid.

Old business suppliers

If you owe money to businesses that supplied goods and services to you, they can try to recover their money in several ways. This includes using debt collection agencies. A debt collection agency has no more power than the organisation you owe the money to. They have no right to come into your home. 

Business rent arrears

If you rented business premises you may still owe rent when you cease trading. Usually, you also have to pay the ongoing rent until your tenancy ends.

Equipment leases

You may have leased equipment for your business. Check the agreement to see if you can keep the equipment when the lease ends. You may have to pay for the equipment until the lease ends, even if you return it.

Accountants’ bills

If an accountant does your tax returns, you may have a problem if you owe them money. Sometimes accountants refuse to complete tax returns or give you back your books if they have not been paid. This can cause problems with HMRC.

Learn more about this topic

If you want to learn more about this topic, you can read our in-depth guide.

Read in-depth-guide

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