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”

    Sammy says:
    17/06/2020 at 16:52

    Hi I am worried about my annual review. I have just finished the first 12 months of my IVA and I didn’t realise my overtime was 50:50 and I haven’t got the money to be able to pay it back what will they do?

    Reply
      James Falla says:
      17/06/2020 at 17:09

      Hi Sammy

      This is quite a common situation. Clearly many IVA companies are not good at explaining the overtime rules when people start their IVAs……. I would say most IVA companies will be reasonable and should help work out a way forward. This will normally involve repaying the amount you now owe with either increased payments or by extending the length of your IVA (or a combination of these).

      Rarely they might really dig their heals in and demand that the amount you owe is paid as a lump sum. If this happens and they wont budge you might have to review whether the IVA is still viable. If you find yourself in this situation give us a call and we can discuss the options with you.

      Reply
    Liam Wiggins says:
    20/07/2020 at 21:45

    I’ve had 3 weeks where I have earned a little over the 10 percent. As we are busy at work. Do I need to inform my iva? I do not expect this to continue. This is after having 5 weeks earning 20 percent less because of being furloughed. Thanks

    Reply
      James Falla says:
      21/07/2020 at 17:48

      Hi Liam

      Yes, if you earn more than 10% of your normal take home monthly income you must inform your IVA company. If you were earning less before due to Covid 19 I would hope your IVA company would be sensible about it and let you keep the extra. On the face of it, it simply cancels out the previous reduction. However I still advise that you let them know to avoid any nasty surprises at your annual review.

      Reply
    Curtis says:
    08/12/2020 at 13:14

    If you get a monthly income of 1400 and a bonus of 500 pounds before tax but after tax it’s 330 do I have to half the 500 or the 330? Thanks

    Reply
      James Falla says:
      09/12/2020 at 10:00

      Hi Curtis

      When calculating how much of any overtime must be paid into your IVA you always use the figure AFTER tax. In any one month, you can keep up to an extra 10% of your normal take home pay. Anything more than that has to be split 50/50 between you and your IVA.

      For example, if your normal take home pay is £1400 and the overtime payment is £330 (after tax), you keep the first £140 (10%). The remaining £190 is split 50/50. So in this month you will need to pay an extra £95 (half of £190).

      Reply
    Senya says:
    19/03/2021 at 15:26

    I am currently in an IVA. I have been doing overtime as part of the pandemic as I am a nurse. My hospital is having a shortage of staff so I made my IP aware that I will be doing overtime as the pandemic has meant alot of staff nurses are shielding etc and not able to work on covid ward which I am. My IP said that the overtime wages will not be taken into account for my monthly income etc during the pandemic. Is this correct and if so am I allowed to save the extra money?

    Reply
      James Falla says:
      19/03/2021 at 15:28

      Hi Senya

      It sounds as though your IVA company knows what they are doing. It is true that if you are a key worker you can keep OT worked as part of the pandemic (as long as your IVA is based on the standard Protocol). Currently this applies to OT earned between 20th April 2020 and 30th April 2021. Given this yes, you certainly can save this extra money if you like.

      Reply
    Melanie says:
    27/04/2021 at 11:37

    Hi, I have received a yearly bonus from work and I know I have to give the majority of it to the IVA which I am fine with. My question is, how is this worked out, as I have an amount in a letter but that is before tax is taken? I am just returning from maternity leave so I don’t have a regular wage slip to compare with.

    Reply
      James Falla says:
      27/04/2021 at 11:42

      Hi Melanie

      Given the terms of your IVA are standard, you will only have to pay around 50% of the bonus you have received into your IVA. This is based on the net incremental amount received after tax and other deductions.

      If you are unsure what your net pay would have been without any bonus, there are two ways to check. You could use an on line tax calculator to work out your normal take home money. Alternatively you will need to speak to your payroll department (or person who does your wages) and they will be able to tell you what the figure would normally be.

      Reply

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