Bankruptcy and my job or own business
If you are made bankrupt in the UK, your job or business may be affected in a number of ways. First, your employer may be informed of your bankruptcy, and they may have the right to terminate your employment (mainly if you work in a financial role). Additionally, any professional licenses you hold may be revoked, meaning you will no longer be able to work in your chosen field. Finally, any debts you owe to your business partners will be discharged, and they may also have the right to dissolve the partnership. While bankruptcy can have a major impact on your career, it is important to remember that it is not the end of the world.
Usually not, unless your employment contract says you must.
In a large majority of cases, you won’t lose your job.
Jobs that could be affected by bankruptcy
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Roles in finance.
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Any type of employment regulated by professional bodies.
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If you are an Insolvency Practitioner.
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If you are working in the gambling industry.
Any businesses you own will be closed down and money used to pay off debt.
Only if you are self-employed as a sole trader or part of a partnership. You are not allowed to start up, manage or promote a Limited Company.
Yes, you can start the same business again as long as it isn’t a Limited Company.
You can return as a Company Director after your bankruptcy is finished, which is usually after one year, provided you haven’t done anything that would be construed as midconduct.
Restrictions on running a business
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Unless the Court gives you permission, you can’t be Director of a Limited Company.
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You cannot promote, setup or manage a Limited Company in any way.
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You can be a sole trader or part of a partnership.
Bankruptcy and Tax
If you file for bankruptcy, all income tax from previous tax years and any income tax you are liable for in the current tax year will be wiped. To stop any more income tax being taken from your salary, change your PAYE tax code to NT.
It’s important to note, changing the tax code to stop income tax deductions doesn’t make you any better off because that ‘saved’ money will be taken by the Official Receiver (OR) in an Income Payments Agreement (IPA) as the Insolvency Service uses this money to cover some of its costs.
Your PAYE tax code will revert to normal at the end of the tax year or if you change jobs during the tax year – which means you will have to pay income tax again. Your IPA will be reduced to accommodate paying the income tax. If you can no longer afford the IPA (due to paying income tax), the IPA will be stopped. Once your bankruptcy ends, the IPA cannot be reimposed even if you earn enough to be eligible for one.
If you go bankrupt towards the end of the tax year, you may well find that your tax code never changes as it takes a while for the change to take effect.
If you are unclear about how much “tax” money you need to pay to the OR, or who to pay it to, then phone up and ask. If in any doubt, put the extra money aside, as it is going to be claimed by the OR at some point.