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IVA and Self-Employment: A Complete Guide
Self-employed individuals can get an IVA - and it is often an excellent solution. Here is everything you need to know about income assessment, business debts, and continuing to trade.
Can Self-Employed People Get an IVA?
Yes - self-employed individuals are fully eligible for an IVA. In many cases, it is particularly well-suited because unlike bankruptcy, an IVA allows you to continue running your business throughout the arrangement.
A self-employed IVA works on the same principles as an employed IVA, but income assessment is based on business earnings rather than a fixed salary.
How Is Income Assessed?
Because self-employed income fluctuates, your Supervisor typically calculates your monthly payment based on your average monthly earnings over a recent period - usually 3 to 12 months. This is then reviewed annually.
You will need to provide: recent business accounts or profit and loss statements, self-assessment tax returns (last 1-3 years), business and personal bank statements, details of business expenses, and income projections if earnings are changing.
Seasonal and Variable Income
If your income varies significantly by season, your IP can propose a flexible payment structure - higher payments in profitable months, lower in quiet periods. This is a common and accepted arrangement for self-employed IVAs.
Business Debts in an IVA
If you operate as a sole trader, you and your business are legally the same entity. This means unsecured business debts - supplier invoices, business credit cards, business overdrafts - can typically be included in your IVA alongside personal debts.
If you operate through a limited company, the company is a separate legal entity. Your IVA covers only your personal liability - personally guaranteed company debts and personal debts - not company debts in the company's name alone.
Sole trader - usually includable
- Business credit cards in your personal name
- Business bank overdraft (if personal liability)
- Supplier invoices (where you have personal liability)
- HMRC self-assessment tax arrears
- VAT arrears (with HMRC agreement)
Limited company - not directly includable
- Company credit card (in company name only)
- Corporation tax owed by the company
- Company trade creditor invoices
- Business debts without a personal guarantee
Can I Continue Trading?
Yes - in most cases. This is a key advantage of an IVA over bankruptcy for the self-employed. You can continue to run your business, enter new contracts, invoice clients, employ staff, and operate under your existing trading name.
However, you cannot take on new credit without your IP's consent. Business credit applications will be difficult during an IVA, and unauthorised new credit is a breach of your IVA terms.
HMRC and Self-Employed IVAs
HMRC is often a significant creditor in self-employed IVAs - for income tax, National Insurance, and VAT arrears. HMRC has a dedicated team that reviews IVA proposals against specific criteria.
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This information is for general guidance only and does not constitute financial or legal advice. An IVA is a formal insolvency solution - fees apply and your credit rating will be affected. Seek independent professional advice before making any decisions.