Defaults are common among self-employed applicants who have had a slower trading year, often because personal cards or loans were used to cover a cash flow gap while waiting for invoices to be paid. A lender will usually want to know when the defaults happened, whether they are satisfied, and whether your income has since settled down.
This page looks at why self-employed defaults often cluster around one difficult period, how several small defaults are viewed compared with one, and how your accounts can support your case. For the general position, see remortgaging with defaults, and for how self-employed income is assessed, see self-employed with bad credit.
On this page
This page covers
- Credit issue
- DefaultsUsually stays on your credit file for 6 years from the default date.
- Employment
- Self-employedLenders commonly ask for tax calculations and accounts covering one or more years.
Read the main guide: Remortgaging when you are self-employed and have bad credit
In short
- Personal borrowing used to bridge a cash flow gap is a common cause of self-employed defaults.
- Several defaults from one difficult year may be easier to explain than a pattern spread over several years.
- A default from HMRC is unusual; an unpaid tax bill without an arrangement is more likely to become a CCJ.
- Accounts showing your income has since stabilised are the strongest support for your case.
Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
Why do defaults often follow a quiet trading period?
Self-employed income can vary month to month, and a run of late-paying clients or a slow season can leave less to cover personal commitments. Cards, overdrafts or personal loans are sometimes used to bridge the gap, and if they cannot be kept up, a default can follow a few months later, once the lender or provider has gone through its own process.
This means a default date can sit some months after the trading dip that actually caused it. It helps to be able to point to your accounts or bank statements from around that time, rather than just the default date itself.
One default or several from the same period: does it matter?
| Pattern | What it may suggest | What can help |
|---|---|---|
| One default, one account | A single missed commitment during a specific gap | A short explanation and evidence the account is now settled |
| Several defaults, same few months | A wider cash flow squeeze across accounts at once | Accounts or bank statements showing the dip and the recovery |
| Defaults spread over several years | A longer-running pattern rather than a one-off | A clearer explanation of what has changed permanently since |
General information only. Lenders assess each application on its own facts.
Several defaults registered within the same few months, on accounts you were using to cover the same gap, can sometimes be easier to explain than the same number spread across separate, unrelated years.
What about an unpaid tax bill?
HMRC does not generally register a "default" on your credit file in the way a card or loan provider does. An unpaid self-assessment bill is more likely to lead to enforcement action or, eventually, a CCJ if it remains unpaid. If you have a Time to Pay arrangement with HMRC, keeping it up matters more to a lender than the fact a bill was once late.
Using your accounts to show the gap has closed
The strongest support for a self-employed default is evidence that the specific problem behind it is over, not just that time has passed.
- Accounts or SA302s for the year of the defaults and the years since, showing the trend
- Bank statements from the affected months and from recent trading
- Confirmation from the creditor that each defaulted account is now satisfied
- A short written note explaining the cash flow gap and what has changed
Clearing defaults with money from a remortgage
If you are considering raising extra money on a remortgage to pay off the defaulted debts, remember this secures previously unsecured borrowing against your home, and extending the term can mean paying more overall. See our page on paying off defaults, and consider free advice from StepChange or MoneyHelper if the wider debts feel unmanageable.
What may affect a self-employed default remortgage
| Factor | Why it matters |
|---|---|
| Age of the defaults | Defaults tied to an older, resolved trading dip are generally viewed more favourably than recent ones. |
| Whether satisfied | Confirmation that each defaulted account has been repaid or settled helps support your case. |
| Number of defaults and timing | Several defaults from the same short period may explain more clearly than ones spread over years. |
| Size of the debts | Small consumer defaults are usually viewed differently from a large unpaid balance. |
| Trading position since | Accounts and bank statements that show income has stabilised support the explanation. |
| Length of trading history | A longer track record either side of the difficult period can help put it in context. |
| Current mortgage payment history | Keeping the mortgage paid throughout counts in your favour, even if other accounts defaulted. |
| Loan-to-value and equity | More equity can widen the choice of lenders when both income and credit are under review. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- Default dates, amounts and current status for each account
- SA302s or accounts covering the period of the defaults and since
- Business and personal bank statements from the affected months
- A short explanation of the cash flow gap that led to the defaults
- Confirmation from creditors that accounts are satisfied, where applicable
- Details of any HMRC Time to Pay arrangement, if relevant
Frequently asked questions
Why do I have several defaults from around the same few months?
This often happens when more than one account was used to cover the same cash flow gap, and each provider went through its own process at a slightly different pace. Explaining the single underlying cause, with accounts to support it, can help an adviser present this clearly.
Does HMRC register a default if I am late paying my tax bill?
Not in the usual sense. HMRC does not typically report to the credit reference agencies in the same way as a card or loan provider. An unpaid tax bill is more likely to lead to enforcement action or a CCJ if it stays unresolved.
Will lenders want to know why I defaulted, or just that I did?
Most advisers find it helps to understand why, particularly for a self-employed applicant, since a defaulted account tied to a clear, resolved trading dip is easier to present than an unexplained pattern. Have your accounts and a short explanation ready.
Should I settle old defaults before I apply for a remortgage?
Settling what you can affords a clearer file and a certificate or letter of satisfaction, though a default stays on file for 6 years regardless. Whether it is worth using a remortgage to raise the money is a separate decision, and the debts become secured on your home if you do.