Director information hub: Understanding the difference between personal and company debts

Company and personal debts are different

Company debts are debts taken on in the name of the company.

These can include:

• PAYE, National Insurance Contributions, Corporation Tax or VAT
• business expenses and costs
• bills from suppliers
• unpaid staff wages
• loans in the name of the company

Personal debts are debts taken out in the name of an individual for business or personal use such as a credit card, utility bills, or a personal car loan.

When are directors liable for company debts?

You are responsible for any money owed by your company that has been personally guaranteed by you.

For example, a finance agreement, overdraft or a bank loan guaranteed by the director.

There are other circumstances where directors are personally liable, some of which are associated with wrongdoing.

For example, HMRC may issue ‘joint and several liability’ notices to directors and others associated with the company to make sure tax is paid.

Dealing with company debts

It is important to address financial problems as soon as possible.

If you do:

• the company may be able to avoid formal insolvency proceedings. For example, you may be able to arrange new finance or a payment plan, and limit the impact on the company creditors, directors and shareholders

If you do not:

• the company is at risk from court and recovery action
• you may become liable for debts incurred by the company in some circumstances

Information on dealing with company debt

Business support helpline

Director information hub: Dealing with company distress

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