How does an IVA work if you’re self-employed?
Self-employment does not block an IVA. It changes the evidence, the review rhythm and what happens in a bad quarter.
The evidence
Recent accounts, tax returns and a realistic view of drawings replace the payslip. A sensible proposal builds in seasonality — a payment profile the business can sustain in ordinary months, with the annual review truing it up against actual figures. Optimistic projections fail arrangements; conservative ones complete them.
HMRC and ongoing tax
Existing tax debt is normally included and bound like any unsecured creditor — HMRC votes like the rest. Tax that falls due during the arrangement must be paid as it arises; new arrears during an IVA are a breach risk, so the budget must genuinely provide for them.
Business expenses vs household expenses
The assessment separates the two: legitimate trading costs come off turnover before “income” exists, then household costs come off income before the surplus is set. Mixing them — personal spending through the business, or trading costs squeezed to inflate the surplus — builds a payment the business cannot actually sustain.
VAT and future tax
Tax and VAT owed at the start are normally included and bound. Tax falling due during the arrangement is a living cost the budget must genuinely carry — new arrears mid-IVA are the most common self-employed failure path, and the honest fix is a budget line for tax from day one, not optimism.
Sole trader vs limited-company director
A sole trader’s business debts are personal debts and go in. A director’s company owes its own debts — the IVA covers what you owe personally, including personal guarantees if called. Directors can usually continue as directors during an IVA (unlike bankruptcy), but company distress alongside personal distress needs joined-up advice, not two separate plans.
What happens to business assets
Tools, equipment and vehicles needed to trade are generally protected — the arrangement wants the business generating contributions, not sold for parts. Unusually valuable assets get discussed in the proposal rather than discovered later.
Can you keep trading?
Yes — that is normally the entire point. An IVA is often chosen by the self-employed precisely because bankruptcy’s restrictions and asset treatment sit worse with a trading business. The application process is the same six stages, evidenced with accounts instead of payslips.
Bad quarters
The machinery is the same as for employees, used earlier: payment breaks for rough patches, variation where the change is structural, and a supervisor told promptly rather than late. Directors of limited companies face additional considerations around the company itself — that is specific advice territory.