A large number of self-employed workers seem to be struggling with outstanding debt according to various reports. And while being self-employed seems to be a popular fantasy to many and becoming more popular as an option, the higher average debt burden that self-employed carry can be difficult to bear. Let’s look at the numbers behind this trend before discussing the factors behind it.

A Nation in Debt

The Money Advice Trust reported that almost half of their clients owed £10,000 or more. They said that nearly one in four people contacting them had more than £30,000 of debt. Interestingly, the self-employed carry higher levels of debt than those who work part-time or full-time. That has national implications once you learn that the number of self-employed has reached 15%, around four million people in all. In 2001, about 12% of the UK workforce was self-employed.

Another report by the ONS found that about one in three people couldn’t meet moderately high unexpected expenses, which is also very alarming.

The Hard Data on the Self-Employed Debt Crisis

According to one report, the self-employed carry four times as much debt as those that are employed full-time. StepChange found that self-employed individuals carried debt that averaged 18.6 times their annual earnings. In comparison, the average person carried 4.1 times their annual income. The self-employed are also more likely to carry debt than those working part-time. Their average mortgage debt was £206,500 compared to £54,600 for full and part-time workers. Self-employed individuals owe roughly twice as much in credit card debt as full-time workers. An analysis of data provided by StepChange found that the self-employed owed an average £300,000, a combination of large mortgages and unsecured debt.

The Factors Driving the Trend

The main reason for this discrepancy was that the self-employed were taking on the debt not just to buy homes and cars like everyone else but to invest in their businesses, as well. This leaves them with higher mortgages and far higher levels of credit card debt than the average person.

Another factor was the lower average income for the self-employed when compared to the general population. They earned, on average, 14% less than their peers. And a debt load is heavier when you earn less. This is partially due to their higher tax bill, but it is also due to many self-employed having low overall incomes due to a wide variety of factors. About a third of workers have an annual turnover below £25,000. With low incomes or gaps in employment, their debt burdens become too much to bear. This is why the falling unemployment rate driven by people becoming self-employed hasn’t affected demand for debt advice. In fact, starting a new business can put the newly self-employed in debt before they get their first payments from clients.

The self-employed tend to rely on credit cards to fill in the financial gap. That’s why the average self-employed person had roughly £16,000 in credit card debt while those in part and full-time employment had nearly £7,000 of credit card debt. In fact, the self-employed were far more likely to take on unsecured debt of all kinds.

According to an article at https://www.cashlady.com/same-day-loans/, short-term loans for business use or any other purpose require a credit check and minimum income of £500 per month. The loan amount you can receive depends on your income. This may require more documentation for the self-employed than the salaried, but the self-employed can take advantage of these types of loans. Short repayment schedules may make these loans a better deal than slowly paying off a credit card. However, the rapid availability of the funds can make or break a business opportunity.

Business mistakes and business failure is another reason why the self-employed tend to carry higher levels of debt. Late payments by clients force them to go into debt to pay for business expenses or make minimum payments on growing credit card balances. Growing minimum payments create a cash flow crunch that may result in borrowing from Peter to pay Paul. And they often don’t have access to things like invoice factoring or other financing options. A lack of essential business management skills forces some to borrow for expenses instead of cash flowing them or out of the mistaken belief that they should borrow money though they may have the cash. Bankruptcy due to business failure certainly leaves the self-employed with a heavy debt burden, regardless of what they do next.


Self-employment may be a way to generate an income, but a combination of factors results in the self-employed carrying far higher debt loads than the average Brit.