If you end up in hospital for three months, the jobs don't stop needing decisions -- you just stop being able to make them. You want money coming in and someone you trust legally able to steer the ship, not your other half guessing passwords on your phone.
8.22.1 The money side -- income if you can't work
For most sole traders and small directors, if you stop, income stops.
Income protection insurance
- Pays you a monthly income if you can't work due to illness or injury.
- Typical cover: 50-70% of your pre-tax earnings, paid after a "deferred period" (e.g. 1-3-6 months off work) until you recover or hit the policy end date.
- Premium depends on your age, health and job risk -- trades pay more than office work but it's often still affordable if you set realistic cover.
Critical illness cover / key-person cover
- One-off lump sum if you're diagnosed with a listed serious illness (heart attack, stroke, some cancers, etc.).
- Can be personal (pays you/your family) or business (key-person cover to help the company survive while you're out).
- For small limited companies, it can sometimes be more tax-efficient to run certain covers through the business as key-person or business critical illness, but you'll want an FCA-regulated adviser to structure that properly.
Statutory Sick Pay (SSP)
If you're employed by your own ltd company as a director, you may be entitled to SSP:
- Currently £116.75/week for up to 28 weeks.
- It's not much, but it's something -- and many director-employees don't realise they qualify.
- You must have been paying yourself at least the Lower Earnings Limit (currently £123/week) through PAYE to be eligible.
- For sole traders with no company, there's no SSP -- you're on your own unless you have income protection.
If you're self-employed with no sick pay, a basic income protection policy plus 3-6 months' savings is the difference between "hospitalised" and "hospitalised and ruined."
8.22.2 The decision side -- Lasting Power of Attorney
If you're unconscious or lose capacity, your partner cannot automatically access business bank accounts, sign contracts, or deal with HMRC for you. A Lasting Power of Attorney (LPA) fixes that.
How it works
Under the Mental Capacity Act 2005, you can set up a Lasting Power of Attorney for property and financial affairs and, if needed, a business LPA that names someone to act for you on business matters if you lose capacity.
Your chosen attorney can then:
- Access bank accounts, pay suppliers, staff and tax bills.
- Talk to HMRC, insurers, the bank and your accountant.
- Sign contracts and make operational decisions to keep jobs moving.
Without an LPA
- Family may have to apply to the Court of Protection for a deputyship -- slow, expensive, and your business can be stuck in limbo while that grinds through.
- A basic LPA can be sorted for low hundreds if you DIY the forms (gov.uk/power-of-attorney); using a solicitor costs more but is still small money compared with one stopped-dead business.
LPA only works while you're alive
If you die rather than become incapacitated, the LPA stops. At that point it's a will and probate situation -- your executor takes over, not your attorney. Make sure you have a will as well as an LPA. See guide 9.16 for the customer-side version of what happens when someone dies mid-job.
8.22.3 The "hit-by-a-bus" file -- what someone needs on day one
You want one place -- digital, printed, or both -- that someone you trust can grab if you disappear for a few months.
Include
- Client list -- names, phone numbers, emails, job addresses, stage of job, next promised dates.
- Live jobs -- what's open, what's quoted, what's booked in, what's mid-build.
- Key logins (or how to get to them via a password manager):
- Email, phone PIN, quoting/invoicing software, banking, HMRC, CIS/VAT, Xero/QuickBooks etc.
- Suppliers and finance -- merchants, hire companies, phone, van finance/lease, insurance, with account numbers and contact details.
- Insurance policies and renewal dates -- PL, EL, van, tools, PI. If a renewal comes up while you're incapacitated and nobody pays it, cover lapses. Your attorney needs to know what's insured and when it renews.
- HMRC deadlines -- self-assessment filing date, VAT return dates, CIS return dates, PAYE RTI deadlines. All have automatic penalties for late filing. Your accountant or attorney needs authority and information to keep filing.
- Basic procedures -- how you usually invoice, typical payment terms, who you'd want to prioritise or finish first.
- Accountant's name and contact details -- your accountant is often the person best placed to keep the financial side running.
Then
- Tell your partner or trusted person where the file is, and link it to the LPA so they've got both the information and the legal power to use it.
- Review it once a year -- the file goes stale as client lists change, passwords change, and jobs change. Do it at the same time as your tax return as a natural trigger.
8.22.4 Staff, subbies and live jobs -- if you employ people
Your employees don't stop having rights
If you've got employees:
- Your duty under the Health and Safety at Work etc. Act 1974 doesn't vanish just because you're ill -- someone competent has to take responsibility for safety and supervision.
- You can't just stop paying employees because you're in hospital. They have employment rights, and if payroll stops, they'll leave -- or take you to tribunal.
- Make sure your LPA attorney or a designated person can run payroll or instruct your accountant/payroll provider to continue.
Make sure at least one other person can
- Run a site safely.
- Talk to clients.
- Liaise with your H&S advisor or consultant if you use one.
CIS subbies
- If you're a CIS contractor and your subbies can't get paid because nobody has authority to approve invoices or release payments, they'll walk. They have no obligation to wait.
- Having someone with bank access and LPA authority to continue paying subbies keeps your jobs alive.
8.22.5 Limited companies -- the sole director problem
If you're the only director of a limited company and you're out:
- The company can't function properly -- banks and others often need a director's signature.
- No one can sign contracts, approve payments above certain limits, or file at Companies House.
Options
- LPA gives your attorney power to act on your behalf for financial affairs.
- Having at least one other trusted director or company secretary who can act gives the business a way to keep going.
- Under Companies Act 2006, the company's articles may allow the remaining directors to appoint an additional director or take certain actions to keep the business running -- but if you're the only one, that mechanism doesn't work.
The simplest fix: appoint a second director (spouse, trusted business partner) who can step in if needed. They don't need to be involved day-to-day, but they need to be able to act in an emergency.
What to do next
If you run the show, this is low-glamour but high-impact work:
- Speak to an FCA-regulated financial adviser about:
- A realistic amount of income protection for your trade and budget.
- Whether critical illness / key-person cover makes sense.
- Speak to a solicitor about putting a property and financial affairs LPA in place, and whether a separate business LPA is sensible for your setup.
- Build your "hit-by-a-bus" file and tell your chosen person where it is; loop in your accountant so they know who can talk to them if you disappear.
- Check your SSP eligibility if you're a director-employee.
- Make sure you have a will as well as an LPA -- they cover different situations.
- Review the file once a year -- don't let it go stale.
Sources
- Mental Capacity Act 2005 -- legislation.gov.uk/ukpga/2005/9/contents -- Lasting Power of Attorney, capacity tests, and Court of Protection.
- Companies Act 2006 -- legislation.gov.uk/ukpga/2006/46/contents -- director duties, appointment, and company governance.
- Health and Safety at Work etc. Act 1974 -- legislation.gov.uk/ukpga/1974/37/contents -- employer duties continue regardless of owner's health.
- Employment Rights Act 1996 -- legislation.gov.uk/ukpga/1996/18/contents -- employee rights to pay, including during employer incapacity.
- Social Security Contributions and Benefits Act 1992 -- legislation.gov.uk/ukpga/1992/4/contents -- SSP entitlement and qualifying conditions.
- GOV.UK guidance on Lasting Power of Attorney -- gov.uk/power-of-attorney -- how to set up, register and use an LPA.
- FCA guidance on income protection and critical illness cover -- published comparisons and consumer guides.
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