Self-employed's debt level rises by £10,000

An “alarming” amount of problem debt is being racked up by the self-employed, seemingly driven by their need to use credit to prop up both their business and gaps in income.

Figures from charity StepChange reveal how self-employed people who approached it for help last year owed an average of £27,739 - £10,000 more than in the previous year.

The average amount outstanding is even higher for self-employed people whose business has failed - £45,292, a sum that the charity said was likely reached by two main uses of credit.

Firstly, self-employed in arrears reported using credit to fill gaps in their income and, secondly, opted again for credit to prop up their business and extend its longevity.

Another reliance on credit is where householders short of income or laid-off employees make the jump to self-employment and use a credit card or overdraft to set-up the venture.

Visible to the charity in this year’s first quarter, this trend of people using loans to “kick-start” an enterprise is ongoing, although the injection often gets drained by running costs.

This is because “the harsh economic reality of owning a business” in the current climate often sees the investment fail to produce the expected return – at least for those self-employed people who turned to StepChange.

External affairs director Delroy Corinaldi added: “The pressure of trying to maintain a business and coping with debt can be extremely stressful; we would urge anyone in this situation to seek help and advice”.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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