Earning overtime or a bonus in an IVA

30/06/2023
Earning overtime or a bonus in an IVA

If you are in an IVA and you earn overtime or a bonus you must tell your IVA company ASAP. But how much of it will have to paid into the Arrangement?

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What happens if you get occasional overtime during an IVA?

Your monthly IVA payment amount is not fixed. If you do overtime or get a bonus in any particular month, you will have to pay more. 

The good news is not all the extra money you have earned has to be paid into the Arrangement.

You get to keep anything extra you earn up to 10% of your normal monthly take home pay. However anything over 10% is split 50/50 between you and your IVA.

For example, if your standard income was £2000 a month, you could earn up to £200 (10%) in overtime or a bonus each month before sharing any with your IVA. However if you earned more (lets say £400), the first £200 you keep. The next £200 is shared: £100 you keep and £100 is paid into your IVA.

You have to report any overtime or bonus you earn to your IP within 14 days of receiving it. If you don’t you risk falling into arrears and having to increase your monthly payments.

Struggling to get your head round all of this? We can help. Call us (0800 011 4712) or complete the form below. The advice is free and confidential.

Income made up of regular overtime

You may have a job where you are used to earning regular overtime or some kind of bonus every month. This will normally mean that your monthly take home pay changes all the time.

If you always earn ‘extra money’ it will be counted as part of your regular income. Your IVA company will account for this by taking an average of what you have taken home over the last 6-12 months. This average figure will then be used as your income when calculating your regular monthly IVA payments.

Regular overtime or commissions that are counted as part of your standard income are not be subject to extra scrutiny each month. But remember if you start to earn more than your agreed average income, you must disclose this.

If you have regular additional income, check it every month. Make sure that it is not exceeding your ‘average income’ identified at the start of the IVA. Always keep your IVA Company in the loop.

Can you keep an annual bonus during your IVA?

If you receive an annual or quarterly bonus during your IVA you will have to pay some of this into the Arrangement. The bonus covers a period of time which is longer than a month. However the amount you have to hand over is calculated in the same way as if it had been for a single month.

In other words you keep up to 10% of your normal monthly take home income. Half of anything over that has to be handed over. So for example if you receive a bonus of £3000 and your monthly take home is £2000 you keep the first £200 (10%). The remaining £2800 is split 50/50 and you have to pay £1400 into your IVA.

This calculation may seem a bit harsh, but remember what the IVA deal is all about. You sign up to paying as much as you can afford for the term of the IVA. Only the amount remaining unpaid at the end is written off.

If you are able to pay more into your IVA due to earning overtime or a bonus the amount of debt written off during the Arrangement will fall.

Will your IVA be paid more quickly if you pay more in?

No. If as a result of overtime or a bonus, you pay more into your IVA, it will not finish early.

All that happens is your creditors get back more of the money they are owed. Your IVA is not paid any faster.

The only time your IVA might end early is if the bonus amount you receive is very large. It would need to be sufficient to repay your original debt in full (less payments already made) plus fees and interest.

If you can afford extra payments during your IVA you will have to pay them. However if your income stays the same you will not have to pay more. You are released from your remaining debt at the end of the IVA. That’s the deal.

Unhappy about paying more into your your IVA after earning overtime or a bonus? Give us a call (0800 011 4712) or complete the form below for free, confidential advice.

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20 thoughts on “Earning overtime or a bonus in an IVA”

    Callum Daniels says:
    29/10/2021 at 14:48

    Afternoon,

    I am coming up to my 3rd year of my IVA and looks as though I will be receiving a bonus this year which exceeds the amount left on my IVA. Will I be able to use this bonus money to pay off the IVA early as I can offer the total of what’s remaining of will they just take the bonus and I carry on for the remaining two years?

    I understand bonus payments have to be taken as part of the IVA but due to it being larger than what’s owed do they have any incentive to take this as a final payment to finish the IVA early?

    Thank you.

    Reply
      James Falla says:
      01/11/2021 at 11:28

      Hi Callum

      If you get a bonus, your IVA will only finish early if the amount received is enough to pay 100% of the debt you originally owed (less payments already made) plus all IVA costs and fees (and in some instances interest).

      In your case if the amount you receive is enough to cover everything as highlighted above then yes, your IVA would then be completed early and your ongoing payments would stop. If not, then your monthly payments will continue.

      Reply
    Cameran says:
    05/01/2022 at 11:44

    If you earn more than 10 percent on a monthly wage due to over time. Would the extra amount be deducted from the monthly salary or would it be reviewed at the end of the year?

    Reply
      James Falla says:
      05/01/2022 at 11:53

      Hi Cameran

      If you earn over time in any month whatever the amount, you must tell your IVA company immediately. Your agreement will normally state you must inform them within 14 days. They will then need to review the extra amount you have earned and decide how much you need to pay them.

      Normally they will ask you to pay any extra you owe to them immediately. They can’t deduct it directly from your salary so you will need to arrange the payment yourself from your bank account.

      It is very important that to speak to them straight away. Don’t wait until the review at the end of the year. If you wait and continue to earn overtime, you may build up quite a sum that is payable and you will be in breach of your agreement. You should be paying it over each month as you go. Then you know exactly where you stand and there is no risk that the money is spent on something else.

      Reply
    MarekD says:
    10/07/2023 at 12:55

    I started my IVA 2018 and it is almost complete, left 8 months to go. After last review i received call from Ebengate about my bonus payment. They calculated over 500 pound bonus within 3 months. Advisor said so i fail to inform company about aditional income and as a result i have to pay to them 100% of my bonus. Is this right?

    Reply
      James Falla says:
      10/07/2023 at 13:01

      Hi Marek

      It is correct that if you earn a bonus during an IVA, you will normally have to pay around 50% of it into the agreement. However, I do not believe that your IVA company can demand 100%. This was almost certainly not in the terms and conditions of your Arrangement.

      Having said that, you will need to find a way forward with your IVA company that you can both agree on. If you can’t agree, you could risk them failing the whole IVA.

      If you would like to speak to me about the situation and your options, please give me a call (0800 011 4712). My advice is free and confidential.

      Reply
    Donna T says:
    17/07/2023 at 18:38

    I was told that as I work in the emergency services, that I would be allowed to keep any overtime I did. Now they are saying I owe them now money from this. When did this change?

    Reply
      James Falla says:
      17/07/2023 at 18:50

      Hi Donna

      Thank you for your query (below).

      The rule regarding emergency services and overtime that you are referring to was bought in to help key workers during the Pandemic. However, this only applied to overtime earned by key workers between 20th April 2020 and 31st July 2021.

      You can read more about this by clicking on the following link: Overtime earned in an IVA during Coronavirus

      If you have earned overtime at any time after the 31st July 21, the standard IVA rules will apply. In other words, you can keep the equivalent of up to 10% of your normal take home pay in any one month. 50% of anything over and above this earned during the same month has to be paid into your Arrangement.

      Reply
    SueS says:
    14/11/2023 at 14:27

    Hi I’ve been paid the wrong pay since 2018 so my salary is being back dated for 5 years which will be in the region of 7K how much of 7K do i have to pay into my IVA. I started my IVA OCT 2021 Thnaks

    Reply
      James Falla says:
      14/11/2023 at 14:29

      Hi SueS

      I believe that your IVA company will treat this payment as a windfall. In other words, they will demand that 100% of the back pay you receive will have to be paid into your IVA. This is regardless of the fact that some of the payment is for years before your IVA started.

      You can read more about what happens if you receive a windfall during an IVA by clicking on this link: Windfall during an IVA

      Reply

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