Can I Start an IVA if I’m Self-Employed? (UK Guide for 2026)

If you’re self-employed and struggling with debt, you might be wondering whether an IVA is something you can actually start while running your own business. The rules can feel confusing, especially when your income changes each month or you owe money to HMRC. 

In this guide, we will walk you through everything you need to know, from eligibility and how a Self-Employed IVA works, to what debts you can include and how it may affect your business. Keep reading to find out whether this solution is right for you in 2026. 

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors to repay your debts over a set period, usually five or six years. It is a legally binding arrangement, which means your creditors must follow the terms once it is approved.

An IVA is set up and managed by a licensed Insolvency Practitioner (IP). You make one affordable monthly payment, and the IP distributes this money to your creditors. During the IVA, interest and charges on your debts are usually frozen, and creditors cannot take action against you.

At the end of the IVA, any remaining unsecured debt included in the arrangement is written off. An IVA is mainly designed for people who have multiple unsecured debts and need a structured repayment plan that fits their financial situation. 

What is a Self-Employed IVA?

A Self-Employed IVA is a type of IVA designed specifically for people who run their own business, work as sole traders, freelancers, or contractors. It works in a similar way to a standard IVA but takes into account the unique challenges of being self-employed, such as irregular income or business-related debts.

This version of an IVA helps you keep your business running while managing your debts. It allows you to include both personal and business unsecured debts in one repayment plan. Payments are based on what your business can realistically afford, and the arrangement can be adjusted if your income goes up or down.

A Self-Employed IVA also helps protect essential business tools, equipment, and assets you need to continue trading, so you can maintain your income while repaying your debts. 

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What Are the Key Differences Between an IVA and a Self-Employed IVA?

While both arrangements follow the same legal structure, there are some important differences. They are as follows: 

1. Income Stability

• Standard IVA: Usually designed for people with stable, predictable monthly income. 
• Self-Employed IVA: Built to handle irregular or seasonal income. Payments can be adjusted based on business cash flow. 

2. Types of Debts Included

• Standard IVA: Mostly personal unsecured debts. 
• Self-Employed IVA: Can include personal debts and business-related debts such as tax arrears, business loans, overdrafts, or supplier debts. 

3. How Payments Are Assessed

• Standard IVA: Payments are based on a fixed monthly budget. 
• Self-Employed IVA: Payments may be based on projected cash flow or average monthly profit instead of fixed wages. 

4. Business Operation

• Standard IVA: Usually no need to consider trading needs. 
• Self-Employed IVA: Allows trading to continue and protects essential business assets and tools. 

5. HMRC Debt

• Standard IVA: Tax debt is less common. 
• Self-Employed IVA: Often includes HMRC debts such as income tax or VAT arrears. 

6. Financial Records Needed

• Standard IVA: Payslips and personal financial documents. 
• Self-Employed IVA: Requires business accounts, cash flow forecasts, invoices, and trading history. 

In simple terms, a Self-Employed IVA is a more flexible version of an IVA, designed to keep your business running while giving you a realistic way to repay your debts. 

Eligibility Criteria for a Self-Employed IVA: Do I Qualify for a Self-Employed IVA?

If you are self-employed and struggling to manage your debts, you may be able to enter a Self-Employed IVA. The basic eligibility criteria are similar to a standard IVA, but with a few extra points related to running a business.

Below are the main things Insolvency Practitioners look at when deciding whether you qualify:

1. You Must Owe Unsecured Debts

A Self-Employed IVA is only for unsecured debts. This includes credit cards, loans, overdrafts, business debts, HMRC tax arrears, and supplier debts. 

Furthermore, secured debts, such as mortgages or hire purchase agreements, cannot be included.

2. You Must Owe a Meaningful Amount of Debt

While there is no strict legal minimum, most self-employed people who enter an IVA usually owe £6,000 to £10,000 or more.

If your debt level is too low, an IVA may not be the most suitable option.

3. You Need to Have More Than One Creditor

Most IVA cases involve multiple creditors. This shows that your debt is spread across several companies, making an IVA a suitable way to deal with everything in one plan.

4. You Must Have a Regular Source of Income

You can still qualify even if your income varies from month to month.

Here, the key point is that you must be able to produce a steady and realistic average income from your business that allows you to make monthly IVA payments.

5. You Must Be Insolvent

This means:

• You cannot repay your debts in full, or 
• You are already missing payments, or 
• You will fall behind soon without help. 

6. You Must Be a Resident of England, Wales, or Northern Ireland

IVAs are not available in Scotland. Scottish residents have different debt solutions, such as a Trust Deed or DAS.  

Additional Considerations

Aside from the basic criteria, Insolvency Practitioners also review extra factors that are unique to self-employed individuals. These do not automatically qualify or disqualify you, but they help determine whether a Self-Employed IVA is workable.

1. Minimum Debt Level

Although there is no strict rule, most practitioners recommend a minimum debt level to make the IVA worthwhile.

For many businesses, this is around £10,000 because the IVA fees and long-term nature make sense at this level of debt.

2. Trading History

Your trading history helps show whether your business can continue to generate income. Practitioners may look at:

• How long you have been trading.
• Whether your income is stable or seasonal.
• Business performance over the last 12–24 months.
• Any major financial changes or upcoming risks.

A long trading history is not required, but some evidence of consistent income helps.

3. Business Viability

The IVA must be affordable throughout the term.

Your business should show potential to keep generating income, even if it is currently struggling. If the business is no longer viable, another debt solution may be more appropriate.

4. Cash Flow and Budget

You may need to provide:

• Recent bank statements 
• Profit and loss figures 
• Cash flow forecasts 

These help the practitioner determine if your business can realistically sustain IVA payments.

5. Ability to Work with Variable Income

Self-employed income often rises and falls. IVA payments can be adjusted, but you still need to show enough average income to support a monthly payment.

6. Existing Legal or Tax Issues

If your business has serious tax or legal concerns, the practitioner may examine these more carefully. Keep in mind, self-employed IVA can include tax arrears, but ongoing compliance with HMRC is important.  

How a Self-Employed IVA Works

A Self-Employed IVA works much like a standard IVA but is shaped around the needs of someone running their own business. It brings all your personal and business unsecured debts into one affordable monthly payment while allowing you to keep trading.

Here is how the process works step by step: 

1. Managed by a Licensed Insolvency Practitioner (IP)

A Self-Employed IVA must be set up and supervised by a licensed Insolvency Practitioner.
The IP’s responsibilities include:

• Reviewing your business and personal finances.
• Helping you create an affordable repayment plan.
• Preparing your IVA proposal.
• Speaking to your creditors on your behalf.
• Managing payments and distributing them to creditors.
• Monitoring your income throughout the IVA.

They act as a middle point between you and your creditors, which means you no longer deal with creditors directly once the IVA begins. 

2. Creating an IVA Proposal

Your IP will help you build a proposal that outlines:

• Your total debts 
• Your business income 
• Your monthly expenses 
• What you can realistically afford to pay each month 
• How your income may change during the year 

This proposal is sent to all your creditors. 

3. How Creditors Vote

For the IVA to be approved, creditors who hold at least 75% of your debt value (by amount owed) must vote in favour.
If enough creditors agree:

• The IVA becomes legally binding.
• All creditors included must follow the terms.
• Interest and charges are normally frozen.

Even creditors who vote against it must follow the arrangement if the required majority approves. 

4. How Payments Are Calculated When Income Is Variable

Self-employed income is rarely consistent. To deal with this, the IP uses several methods to calculate payments, such as:

• Average income over the past 6–12 months. 
• Busy and quiet trading periods.
• Profit-and-loss figures.
• Cash flow forecasts.

Your payments are based on what your business can afford, not on fixed wages like in a standard IVA.
If your income changes during the IVA:

• Payments can be reviewed.
• A variation can be submitted to creditors.
• Your payments may increase or decrease.

This flexibility helps you stay in the IVA even if your income fluctuates throughout the year. 

5. Handling Business and Personal Debts Together

One of the biggest benefits of a Self-Employed IVA is that it allows you to combine both types of unsecured debt into one plan. 

This can include:

• Business overdrafts 
• Supplier debts 
• HMRC tax arrears 
• Credit cards 
• Personal loans 
• Utility arrears 
• Business loans that are not secured 

Your IP will look at your full financial situation, not just your personal debts, but also the money you owe through your business. This creates a complete picture so you can manage everything through one monthly payment.

Throughout the IVA, you can keep trading, keep your business tools and equipment, and continue running your day-to-day operations. This makes a Self-Employed IVA far more suitable for business owners than many other debt solutions. 

 

What Debts Can Be Included (and What Can’t) in a Self-Employed IVA 

A Self-Employed IVA allows you to bring together a wide range of personal and business unsecured debts into one affordable repayment plan. However, not every type of debt is eligible. Knowing what can and cannot be included will help you decide whether this solution is right for you. 

Debts You Can Include in a Self-Employed IVA

Most unsecured debts can be included in a Self-Employed IVA. These are debts that are not tied to an asset such as a house or a vehicle.

Common debts that qualify include:

1. Business Debts

• Business overdrafts 
• Supplier debts 
• Unsecured business loans 
• Merchant cash advances (if unsecured) 
• Business credit cards 

2. HMRC and Tax Debts

• Income tax arrears 
• VAT arrears 
• National Insurance arrears 

These debts are often included for self-employed people, and HMRC regularly participates in IVA arrangements. 

3. Personal Unsecured Debts

• Credit cards 
• Personal loans 
• Store cards 
• Payday loans 
• Catalogue debt 
• Overdrafts 
• Utility arrears (e.g., gas, electricity, water) 
• Rent arrears (in some cases, although ongoing rent must still be paid) 

4. Old Business Debts from Previous Trading

If you have older trading debts from a previous business attempt, these can also be included as long as they are unsecured. 

Debts You Cannot Include in a Self-Employed IVA

Some debts are legally excluded from IVAs. These cannot be written off at the end of the arrangement and must be handled separately.

Debts generally not eligible include: 

1. Secured Debts

These are debts tied to an asset, such as:

• Mortgages 
• Secured business loans 
• Hire purchase agreements 
• Vehicle finance 

You must continue paying these separately.

2. Student Loans

Both standard student loans and postgraduate loans cannot be included in an IVA.

3. Certain Court or Legal Obligations

• Child maintenance arrears (CMS) 
• Court fines 
• TV licence arrears 

These must be paid outside the IVA. 

4. Some Types of Tax Penalties

Most tax arrears are allowed, but certain criminal or fraudulent penalties may be excluded. 

Special Issues for Business Bank Accounts and Business Debts

Running a business while in a Self-Employed IVA can raise extra considerations. Here are the main points:

1. Business Bank Accounts

If you owe money to the bank where your business account is held (e.g., overdraft), the bank may freeze or close the account once the IVA starts.

Because of this, many self-employed people open a new basic business account before entering the IVA.

2. Supplier Relationships

If you have supplier debts included in the IVA, some suppliers may change your account terms.

You may need to switch to:

• Cash on delivery 
• Prepayment 
• Shorter credit limits  

This depends on the supplier’s policy, not the IVA rules. 

3. Business Tools and Equipment

You can usually keep essential tools and equipment because your business must continue operating. Only non-essential luxury items may be questioned.

4. Joint Business Debts

If you share business debts with another person (e.g., a partnership), only your share enters the IVA. The other person remains responsible for the rest unless they enter their own debt solution. 

A Self-Employed IVA brings both personal and business unsecured debts under one plan, making it a flexible option for people who need to keep trading while managing financial pressure. 

How Being Self-Employed Changes Key Parts of the IVA

Being self-employed can affect several parts of how an IVA is set up and managed. Because your income may rise and fall during the year, your IVA needs to be more flexible than a standard arrangement. 

Here’s how it usually works:

1. Flexible Payments Because Income Can Fluctuate

Here, your Insolvency Practitioner (IP) will look at your average monthly income from self-employment. They will also check your business expenses and personal living costs to work out what you can realistically afford.

What Is Surplus Income?

Surplus income is the amount left after you pay:

• Essential business costs 
• Tax and VAT 
• Personal living expenses 

This leftover amount becomes your IVA payment.

How Payments Are Calculated with Irregular Income

If your income varies each month, the IP will often use a yearly average. You might be asked to provide:

• Bank statements 
• Invoices 
• Cash-flow forecasts 

Some IVAs allow payments to be higher in busy months and lower in quiet months, as long as you meet the overall yearly payment target.

Possibility of Payments Changing if Income Changes

If your income increases or decreases during the IVA, your payments may be reviewed. Your IP may adjust the payment to match your new financial situation.

This helps you keep trading without falling behind. 

2. Keeping Business Assets or Accounts to Keep Trading

Most self-employed people can continue running their business while in an IVA.

You are usually allowed to keep:

• Business tools 
• Essential equipment 
• A business vehicle (if needed for work) 
• Your business bank account 

The IVA is designed to keep your business running because your income is needed to support the arrangement. 

3. Dealing with HM Revenue & Customs (HMRC)

If you owe tax, VAT, or National Insurance, these debts can normally be included in your IVA. However, you must keep up with all new tax and VAT payments from the moment the IVA starts.

HMRC may require:

• Clear business records. 
• Proof that you are keeping up with current tax filings. 
• Accurate projections for future income. 

Your IP will usually deal with HMRC directly as part of the IVA proposal. 

What to Prepare Before Starting a Self-Employed IVA

To create a realistic and affordable IVA, you’ll need to prepare:

• Recent business accounts 
• Income and expense records 
• A cash-flow forecast 
• Bank statements 
• Details of all business and personal debts 

This information helps the IP confirm what you can afford and how the IVA should be structured. 

Benefits and Drawbacks of Choosing an IVA When Self-Employed

Choosing an IVA as a self-employed person can offer strong protection and a route to becoming debt-free, but it also comes with responsibilities and long-term effects. Here are the main benefits and drawbacks to consider. 

Benefits of a Self-Employed IVA 

1. You Can Continue Running Your Business

Unlike bankruptcy, an IVA usually allows you to keep trading. You can keep essential tools, equipment, and business accounts, so your income is not disrupted.

2. Legal Protection From Creditors

Once the IVA is approved: 

• Creditors must stop contacting you. 
• They cannot take legal action. 
• Interest and charges are frozen. 

This gives you breathing space to focus on work and repayments.

3. Affordable Monthly Payments

Payments are based on what you can realistically afford after business and living expenses. This makes the IVA more flexible for people with fluctuating income.

4. Debt Write-Off at the End

Any remaining unsecured debt included in the IVA is usually written off after 5–6 years. This gives you a clear end date to become debt-free.

5. HMRC Debts Can Be Included

Tax debts, VAT arrears, and National Insurance arrears can be part of the IVA, which is helpful for many self-employed people.

6. Protects Business Reputation

An IVA is private. It is not advertised in newspapers, which helps protect your business relationships. 

Drawbacks of a Self-Employed IVA

1. Long-Term Commitment

Most IVAs last 5–6 years. You must stick to the payment plan for the entire period unless your IP agrees to changes.

2. Impact on Your Credit File

An IVA stays on your credit report for six years from the start date. During this period, getting new credit or business finance can be difficult.

3. You Must Prove Sustainable Business Income

Your IVA will only work if your business generates enough income to cover the payments. If your business has unstable or declining income, it can be harder to maintain the arrangement.

4. Budget Restrictions

You will need to follow a set budget agreed with your IP. This may limit some personal or business spending.

5. Limited Access to Credit During the IVA

You cannot take out more than £500 of credit without permission from your IP. This may restrict business growth if you normally rely on credit for working capital. 

Specific Risks for Self-Employed People

Being self-employed adds some additional risks when entering an IVA:

• Income Falls: If your business income drops for several months, you may struggle with IVA payments. This could lead to payment breaks or a proposal to vary the IVA. But in some cases, the IVA could fail. 
• Seasonal Work: People with highly seasonal income must keep a cash buffer to avoid missed payments. 
• Unexpected Costs: If you rely on equipment or transport for work, sudden repair or replacement costs can affect your ability to pay. 
• Tax Obligations: You must keep up with new tax and VAT payments during the IVA. Falling behind could cause issues with HMRC. 

 

Step-By-Step: How to Apply for a Self-Employed IVA in the UK

A Self-Employed IVA follows a structured process. You will work closely with a licensed Insolvency Practitioner (IP), who handles the setup, negotiations, and ongoing management. Below is a clear step-by-step guide. 

1. Gather Your Documents

Before starting the application, you need to collect the key financial information your IP will review. This includes:

• A full list of all personal and business debts.
• Recent business accounts.
• Income and expense records.
• Bank statements.
• Cash-flow forecasts.
• Details of any assets, tools, or equipment.
• Evidence of tax and VAT payments or arrears.

Having accurate information helps create an IVA proposal that creditors are likely to accept. 

2. Find and Meet a Licensed Insolvency Practitioner (IP)

You cannot set up an IVA on your own. A licensed IP must prepare and manage it.

During the initial consultation, the IP will: 

• Review your debts and business income.
• Check if an IVA is suitable.
• Estimate what your monthly payments might be.
• Explain the risks, benefits, and alternatives.

If you decide to go ahead, the IP begins preparing your IVA proposal. 

3. Draft the IVA Proposal

The IP will write a formal proposal that includes:

• Your business income 
• Your essential expenses 
• How much you can afford to pay 
• How long the plan will last 
• How much creditors are expected to recover 

This is the document creditors vote on. 

4. Submit the Proposal to Creditors and Vote

Your creditors receive the proposal and have the chance to vote on it.

For the IVA to be approved:

• At least 75% (by debt value) of voting creditors must agree. 

If approved:

• The IVA becomes legally binding on all included creditors. 
• Interest and charges are frozen. 
• Collection calls and legal action must stop. 

5. What Happens After the IVA Starts

Once the IVA begins, you will need to:

• Make monthly payments to the IP.
• Provide annual accounts and income reviews.
• Update the IP if business income changes.
• Keep up with new tax and VAT obligations.

The IP distributes payments to creditors and supervises your progress throughout the arrangement. 

6. Effects on Your Credit Score and Future Borrowing

An IVA will:

• Remain on your credit file for six years.
• Make it harder to get credit, mortgages, or business loans.
• Require approval from your IP for any credit over £500 during the IVA.

After the IVA completes, your credit rating can gradually improve. 

7. If Circumstances Change or the IVA Fails

Life and business income can change, especially for self-employed people. Here’s what can happen:

If Your Income Drops or Business Slows,

You may be able to request:

• A temporary payment break 
• Lower payments 
• A variation meeting (creditors vote on changes) 

Your IP will guide you through what is possible.

If the IVA Fails

If you cannot maintain payments and no variation is approved, the IVA may fail. Possible outcomes include:

• Creditors may restart collection action.
• Bankruptcy may be recommended.
• You may need to explore other debt solutions.

What Should I Do If My Debts Are Huge And I Cannot Afford To Settle Them?

Sometimes, it may be difficult to agree on a payment plan with your creditor or debt collection agency, particularly if the payments are financially overwhelming.

In such cases, you might want to explore potential debt solutions in the UK. There are several options available in the UK, each with its own eligibility criteria. Choosing the right option can help resolve your debt issues, but the wrong one may make your financial situation worse.

However, it is essential to seek professional advice before committing to any debt solution. A debt advisor can help you assess your situation and guide you in selecting the most appropriate option.

Some of The Key Debt Solutions Available in England, Northern Ireland, and Wales:

• Debt Management Plan (DMP): An informal arrangement where you make monthly payments toward your debts. There is no legal commitment, but your creditors may agree to reduce interest or freeze fees.
• Individual Voluntary Arrangement (IVA): A formal agreement where you make regular payments to creditors over 5 or 6 years. The remaining debt may be written off, but this solution has strict criteria.
• Debt Relief Order (DRO): Designed for individuals in severe financial distress, this option freezes interest and allows a year of no payments, potentially leading to debt resolution.
• Bankruptcy:  A formal legal process that can clear most debts if you are unable to repay them. Bankruptcy provides a financial reset, but it also has serious long-term consequences, including restrictions on your financial affairs and potential asset loss.

Debt Solutions Available in Scotland

1. Protected Trust Deed: A formal agreement to repay part of what you owe over four years. The remaining debt may be written off afterward. It is legally binding and affects your credit rating.
2. Debt Arrangement Scheme (DAS): A government-backed scheme allowing you to repay your debts through a Debt Payment Programme (DPP) based on what you can afford. Interest and charges could be frozen, and creditors can’t take legal action.
3. Sequestration (Scottish Bankruptcy): A formal insolvency process where most debts may be written off, but assets may be sold to repay creditors. It offers a fresh start but comes with serious consequences.
4. Minimal Asset Process (MAP): A simplified form of bankruptcy designed for individuals with low income and few assets. It allows eligible debts to be written off after six months, provided the individual fully cooperates with the process. However, in practice, the process may take longer depending on the complexity of the case. MAP also offers lower fees and reduced administrative burden compared to full bankruptcy.

Caution: These debt solutions have both advantages and drawbacks, so it’s important to carefully weigh your options before making a decision.

Furthermore, if you are unsure which debt solution suits your situation, speak to a professional debt advisor. Free, independent advice services like MoneyHelper can help you assess your finances and find the best option for you.

Final Thoughts

If you are self-employed and struggling with debt, a Self-Employed IVA can be a practical way to manage both personal and business debts while keeping your business running. It offers legal protection from creditors, flexible payments based on your income, and the potential to write off remaining unsecured debts at the end of the arrangement.

However, it is a long-term commitment that impacts your credit file and requires careful planning, realistic income projections, and ongoing communication with your Insolvency Practitioner. Being self-employed adds unique considerations, such as handling irregular income, including HMRC debts, and maintaining essential business assets.

Before deciding, it is important to gather all your financial records, understand the eligibility criteria, and consult a licensed insolvency practitioner or professional debt advisor. Exploring all available debt solutions (whether an IVA, DMP, DRO, or bankruptcy) ensures you choose the option best suited to your circumstances.

A Self-Employed IVA can provide a structured, manageable path out of debt, helping you regain control of your finances and continue running your business with confidence. 

Key Takeaways

• A Self-Employed IVA is a formal debt solution designed for business owners, freelancers, and sole traders to manage personal and business unsecured debts. 
• It is managed by a licensed Insolvency Practitioner (IP), who prepares the proposal, negotiates with creditors, and supervises payments. 
• Payments are flexible and based on your business income, allowing adjustments if your earnings rise or fall. 
• Most unsecured debts can be included, such as credit cards, personal loans, business loans, supplier debts, and HMRC arrears. 
• Debts that cannot be included include secured loans, mortgages, student loans, child maintenance, and certain legal obligations. 
• Eligibility requires multiple unsecured debts, sufficient income to make monthly payments, and residency in England, Wales, or Northern Ireland. 
• A Self-Employed IVA allows you to continue trading and keep essential business assets while repaying debts. 
• Benefits include legal protection from creditors, structured repayment, debt write-off at the end, and privacy compared to bankruptcy.  
• Drawbacks include long-term commitment (5–6 years), impact on credit score, restricted access to credit, and the need for realistic, sustainable business income. 
• Professional advice from an IP or independent debt advisor is essential to determine if a Self-Employed IVA is the right solution for your financial situation.  

FAQs

How is the monthly payment calculated for a self-employed IVA?

Monthly payments in a self-employed IVA are based on your personal income, which can be irregular. Your insolvency practitioner will assess past earnings, forecast future income and expenses, and agree on flexible payments that reflect your business cash flow.

Is applying for a self-employed IVA complicated?

It can be more complex than a standard IVA because it requires detailed reviews and forecasts of both business and personal finances. Working with an insolvency practitioner experienced in self-employed cases can make the process more manageable.

Can I include HMRC debt in a self-employed IVA?

Yes, HMRC debts such as income tax, VAT, or National Insurance arrears can usually be included in a self-employed IVA, allowing you to manage tax debts alongside other unsecured creditors.

Can I start a new business while in an IVA?

Yes, you can start or continue running a business during an IVA. You must inform your insolvency practitioner, and your business finances must be managed carefully to ensure IVA payments remain affordable and up to date.