For those looking to start a debt solution such as an Individual Voluntary Arrangement (IVA) or a Debt Management Plan (DMP) their income is crucial in calculating affordable payment levels. When people receive consistent income amounts - salary, pensions, benefits - the figure is known and can be used to assess repayment levels. However for the self-employed, working out net income is not as straightforward.

Variable income

For the self-employed, income may vary day to day as well as seasonally. The unreliability of income can of course be the very reason for the debt as the cash-flow is so uncertain. It may well be that income has to be calculated on an average over the whole year. The flow of income and outgoings needs to be understood and a system found that enables the running costs of the business as well as personal outgoings to be met, despite the fluctuating fortunes of the business.

Basic calculation

The simplest way of assessing net income is to calculate total revenue (all money in) and deduct all business expenses (all the costs involved in generating the income) - which leaves a taxable income figure. Some of this needs to be set aside to cover tax/national insurance (perhaps 20 %?), which then leaves a net profit figure. This is the equivalent to bring home pay.

Income tax

For the self-employed who are responsible for paying their own income tax there is the extra pressure of organising finances in such a way that we do not fall behind with tax payments. It is possible to set up a monthly standing order to HMRC to pay estimated amounts rather than have the pressure of meeting bills every 6 months.


Many who are self-employed prefer to simply pay an accountant to manage the finances and make the necessary tax returns. Better to allow the professionals to ensure that all is done accurately and with attention to detail. Accountants may well be able to help the self-employed claim allowable expenses which could more than cover the accountant's fee. However, for those whose business is not complicated or who are not daunted by the paperwork, sorting out their own tax returns/accounts need not be impossible.

The above is provided as information only. does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts.