Self Employed but Unable to Work Due to Illness? Here's What You Should Do

Charlotte Baroukh

Tax Expert @ Pie

5 min read

What to Do If You're Self-Employed and Unable to Work Due to Illness

Self-employed persons who find themselves unable to work due to illness are in a particularly precarious position. But if they plan ahead, stay calm and take the tips provided in this guide to heart they should be able to weather the storm without compromising their long-term position.

If you are self-employed but are currently unable to work due to illness or injury, there are a number of things you should do to ensure you are able to transcend your current difficult situation. The good news is that if you have a reliable internet connection none of the following require you to leave home.

Take Stock of Your Financial Situation

If you are self-employed you should be in the habit of keeping close tabs on your finances. That way if you find yourself unable to work for a period of time you will have a good idea of where you stand. If for some reason, however, you haven't assessed your financial situation in a while you should do so early on in your illness and create a detailed plan for dealing with essential expenses.

Consider Your Financial Assistance Options

If a review of your finances has revealed storm clouds on the horizon, you should explore your options regarding financial assistance. Depending on your situation, you may be eligible for Employment and Support Allowance (ESA), Universal Credit, or other types of emergency support available.

Contact Creditors

If it seems as though you may have some difficulty meeting your obligations during your recovery period it is important that you contact creditors (and if necessary, suppliers), and inform them of your current situation. If necessary, ask if you can defer or reduce payments until you have made a full recovery and are back to work.

Review Your Insurance Policies

Many insurance companies will provide coverage during critical illness or offer income protection should you find yourself unable to work for a time. It's crucial to assess whether your existing Insurance policy might provide suitable coverage in order to help you deal with your current situation effectively.

Talk to a Financial Advisor

If you have reviewed your finances and explored insurance and assistance options but remain uncertain, consulting with a financial advisor could be invaluable. They can help devise a strategy to navigate your situation successfully. Utilizing tools like the Pie Tax App can streamline your financial management, ensuring compliance and optimizing tax strategies during recovery.

Keep Detailed Records

Keep detailed records of your financial situation while you are incapacitated. That includes recording all correspondence with creditors and suppliers and keeping an expense log. Should you need government or charity assistance, these records will help support your case. They’ll also be a useful reminder where you stand financially.

Contact HMRC

HMRC can also be very useful in helping direct you toward support and benefits. If you are self-employed and facing a protracted recovery period from illness or injury, you can contact HMRC to explore any available options. If you need to forego self-employment due to illness, notify HMRC that you are closing down your business, while also following official steps for closing a self-employed business to ensure all regulatory obligations are met.

Don’t Lose Sight of Your Recovery

With everything going on relative to your financial situation, you could easily lose track of your recovery. Make sure that doesn’t happen because you want to emerge physically sound so that you can resume your career, as well as learning how to promote employee health and well being if you expand your team later once your business operations stabilise

Informing HMRC That You Are Giving Up Self-Employment

Should your current situation cause you, for whatever reason, to give up self-employment you must inform HMRC that, following the current tax year you will no longer be filing annual self-assessments. In addition, you will need to make sure you file your final self-employment tax return.

Informing HMRC of your change of status is a fairly straightforward process, which can be managed alongside accessing financial assistance for self-employed workers facing health crises during transitional periods.

Go to - https://www.gov.uk/stop-being-self-employed
Click or tap the link that says “Tell HMRC you are stopping self-employment”
Sign into your government gateway account
Then follow the prompts to inform HMRC of your decision

You will need to provide your National Insurance number and your UTR in order to verify your identity and complete the process.

What Happens If a Self-Employed Person Does Not Notify HMRC That They Stopped Working?

Failing to notify HMRC that you are no longer self-employed or that you are ending/leaving a business partnership could cause your life to get very complicated. HMRC will continue to expect you to file self-assessments and when you don’t they may slap you with penalties. It is also likely that HMRC will formulate an estimated tax bill for you that is for far more than you actually owe.

What’s more, the estimated tax bill they send you is legally enforceable, meaning you can’t just brush it off as being irrelevant because you are no longer self-employed. If HMRC send you a tax bill, estimated or not, they expect you to pay it.

You may be able to get out from under an estimated tax bill but only if you notify HMRC about your changed status and file your own tax return for the same period. Be aware, however, that there are time limits involved. If you wait too long there will be no way to escape having to pay the estimated tax.

Conclusion

If you are self-employed and find yourself unable to work for an extended period of time, stay calm and follow the above tips. If your illness or injury has made you rethink self-employment altogether, make sure you inform HMRC, while also navigating financial support options for the self-employed during medical leave to protect your household income.

Want to track your tax situation more closely? Why not try out Pie App – the easy-to-use personal tax management app. The Pie Tax App is completely free to use, find out what features are included here:

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Frequently Asked Questions

What financial support can I receive if I'm self-employed and unable to work due to illness?

If you are self-employed and facing illness, you may be eligible for Employment and Support Allowance (ESA), Universal Credit, or other emergency support. Contact HMRC to explore your options.

How do I notify HMRC if I need to close my self-employment due to illness?

If your illness requires you to cease self-employment, you must inform HMRC about closing your business. This involves notifying them of your situation and completing necessary paperwork.

Can insurance cover help me financially during my illness as a self-employed individual?

Body: Many insurance policies offer coverage during critical illness or provide income protection. Review your policies to see if they can assist you during this challenging time.

What steps should I take to ensure I comply with tax obligations while unable to work?

While unable to work due to illness, it's crucial to stay compliant with tax obligations. Use tools like the Pie Tax App or consult tax professionals to manage your taxes effectively.

How can I prepare financially for future illness affecting my self-employment?

To prepare for future illness impacting your self-employment, consider setting aside emergency funds and reviewing insurance coverage options that offer income protection or critical illness cover.

How is Pie different?

Pie is the only app that handles multiple income streams and helpful advice when you need it.

Save £830 per year vs Quickbooks + Accountant

Return

Refund

We don't charge commission

Fees

Mobile App

MTD

Real Time Tax figure

Bookkeeping

Receipt reconciliation

Open banking integration

Multiple incomes / accounts

Direct HMRC submission

Invoicing

Tax support and advice *

Return checks

We do it for you

Free

£7.50 per month

£59

£126

Quickbooks

(Simple start)

£230

per year

Taxfix

£249

per year

£349 per year

£249

Accountant

£600 avg

per year

FREE

10 Features

Mobile App

MTD

Real Time Tax figure

Bookkeeping

Receipt reconciliation

Open banking integration

Multiple incomes / accounts

Direct HMRC submission

Invoicing

Tax support and advice *

£7.50 per month

Return checks

£59

We do it for you

£126

Quickbooks

£230

per year

7 features

Taxfix

£249

per year

4 features

Accountant

£600

avg per year

5 features

Self Employed but Unable to Work Due to Illness? Here's What You Should Do

What to Do If You're Self-Employed and Unable to Work Due to Illness

Take Stock of Your Financial Situation

Consider Your Financial Assistance Options

Contact Creditors

Review Your Insurance Policies

Talk to a Financial Advisor

Keep Detailed Records

Contact HMRC

Don’t Lose Sight of Your Recovery

Informing HMRC That You Are Giving Up Self-Employment

What Happens If a Self-Employed Person Does Not Notify HMRC That They Stopped Working?

Conclusion

How is Pie different?

Pie is the only app that handles multiple income streams and helpful advice when you need it.

Save £830 per year vs Quickbooks + Accountant

FREE

£230

£249

£600

MTD is Free with Pie

Frequently Asked Questions

What financial support can I receive if I'm self-employed and unable to work due to illness?

How do I notify HMRC if I need to close my self-employment due to illness?

Can insurance cover help me financially during my illness as a self-employed individual?

What steps should I take to ensure I comply with tax obligations while unable to work?

How can I prepare financially for future illness affecting my self-employment?

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Self Employed but Unable to Work Due to Illness? Here's What You Should Do

What to Do If You're Self-Employed and Unable to Work Due to Illness

Take Stock of Your Financial Situation

Consider Your Financial Assistance Options

Contact Creditors

Review Your Insurance Policies

Talk to a Financial Advisor

Keep Detailed Records

Contact HMRC

Don’t Lose Sight of Your Recovery

Informing HMRC That You Are Giving Up Self-Employment

What Happens If a Self-Employed Person Does Not Notify HMRC That They Stopped Working?

Conclusion

How is Pie different?

Pie is the only app that handles multiple income streams and helpful advice when you need it.

Save £830 per year vs Quickbooks + Accountant

FREE

£230

£249

£600

MTD is Free with Pie

Frequently Asked Questions

What financial support can I receive if I'm self-employed and unable to work due to illness?

How do I notify HMRC if I need to close my self-employment due to illness?

Can insurance cover help me financially during my illness as a self-employed individual?

What steps should I take to ensure I comply with tax obligations while unable to work?

How can I prepare financially for future illness affecting my self-employment?