- Sole traders
- Personally liable for all business debts
- Limited companies
- The company is liable, but directors can be in some cases
- First priorities
- Tax, wages, rent and finance you need to trade
- Free help
- Business Debtline offers free, independent advice
On this page
Who is liable for business debts?
It depends on how your business is set up.
- Sole traders and partners are personally liable. There is no legal split between you and the business, so creditors can go after personal assets, including savings and your home.
- Limited company directors are not usually liable for the company’s debts. The exceptions are personal guarantees you have signed, an overdrawn director’s loan account and cases where directors are found to have traded wrongfully or acted improperly.
Bounce Back Loans taken by sole traders are personal debts. If you are a director, ask an adviser about your own position.
Common types of business debt
- Tax owed to HMRC, such as VAT, PAYE, corporation tax and Self Assessment. See our HMRC debt guide.
- Trade suppliers and unpaid invoices.
- Business loans, overdrafts and business credit cards.
- Commercial rent and business rates.
- Vehicle and equipment finance.
- Personal guarantees given to lenders or landlords.
Talk to a free adviser first
An adviser can look at your whole budget, deal with creditors for you and explain which option suits you. Get free debt advice.
Which debts to deal with first
Not every creditor has the same power. Tax authorities, landlords and secured lenders can act quickly, and unpaid wages and employee deductions carry legal duties. Ordinary supplier invoices and unsecured loans usually come after these.
- Tax: HMRC can add penalties and interest and has strong enforcement powers.
- Employees: wages, PAYE and pension contributions.
- Premises: rent and rates, because landlords can act against the business.
- Essential finance: vehicles and equipment you need to keep trading.
Write down what you owe, who each creditor is and what they can do. A free adviser can help you rank them.
Options for sole traders and partners
Because you are personally liable, your choices are the same as for personal debt, with some extra points about the business.
- Agree a payment plan with creditors, including HMRC’s Time to Pay.
- A debt management plan for steady income.
- An IVA, which can be arranged around variable earnings and lets many people keep trading.
- A debt relief order if your income and assets are low.
- Bankruptcy, which can involve selling business assets.
Options for limited companies
- Negotiate with creditors, or agree Time to Pay with HMRC.
- Company voluntary arrangement (CVA): a formal plan to repay creditors over time while the company keeps trading.
- Administration: formal protection from creditors while the business is rescued or sold.
- Creditors’ voluntary liquidation: closing an insolvent company in an orderly way.
Once a company is insolvent or heading that way, directors have to think about creditors’ interests. Carrying on and taking on credit you cannot repay can create personal liability. Speak to a licensed insolvency practitioner before you make a decision, and be cautious about closing or striking off a company that has debts.
Where to get free help
Business Debtline gives free, independent advice to sole traders, partners and small businesses. MoneyHelper, StepChange, National Debtline and Citizens Advice can help with the personal side of business debt.
Frequently asked questions
Can my home be taken for business debts?
If you are a sole trader or have given a personal guarantee, creditors who win a court judgment can enforce against your assets, which can include your home. A limited company’s debts are not secured on your home unless you have agreed that.
Can I keep trading in an IVA?
Often yes. An IVA can allow for business costs and changing income, but the plan needs careful preparation. Bankruptcy has more restrictions on running a business.
Should I stop trading?
Not automatically. Closing a business does not remove debts you are personally liable for. If a limited company is insolvent, directors need advice promptly about their duties.
Can businesses use Time to Pay?
Yes. HMRC can agree to spread tax debts over time if you cannot pay in full now. Contact HMRC before a deadline passes where you can.
What if I have both business and personal debts?
Treat them together. A free adviser can look at both and tell you which solution suits you. Personal and business debts can interact, especially with guarantees and joint liability.
This guide gives general information and is not personal advice. Rules and limits change, so check with a free adviser before acting. Last reviewed 11 November 2026.