Pay Increase during an IVA

15/06/2023
Pay Increase during an IVA

If you get a pay increase during an IVA you should be able to keep some of the extra money you earn. However your payments may also go up.

Included in this article:

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Will your IVA payments go up after a Pay Increase?

Your income is likely to go up during your IVA. A common reason for this is you get a pay increase. Either your employer pays you more or you get a better paid job.

You might also have other types of income which increase such as pension or benefits payments.

If you do start earning more during your IVA, your monthly payment amount may also go up. However, the change is not automatic. It will only happen if your disposable income improves.

Your payments will not change if, after accounting for changes in your living expenses, your disposable income remains the same.

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

How is any additional IVA Payment calculated?

As soon as you receive a pay increase or any other permanent improvement in your income you must inform your IVA Company. Do not wait for your next annual review.

You will then be asked to submit a new income and living expenses budget. This will be reviewed.

If your disposable income has gone up, your IVA payment may also rise. However the rise in your payment will be less than the rise in disposable income.

This is because the terms of most IVAs state that you can keep 50% of any increase due to a rise in income. As such if your original disposable income was £100/mth and this has now risen to £200 a month your IVA payment will rise by just £50 to £150 a month.

Does a Pay Increase mean your IVA finishes sooner?

If your payments go up as a result of a pay increase you may think that this would then reduce the length of your IVA. It would seem logical as the amount you originally agreed to repay during your Arrangement will be paid faster.

This however is not the way an IVA works. If your payments increase the number of outstanding payments remain the same. The increase simply means that you pay more into the plan and your creditors receive more of the money they are owed.

The terms of most IVAs state that if possible (because of a wage increase or the like) you are obliged to pay 100% of the original debt you owed plus IP fees plus interest. The Arrangement will only finish early if all these amounts have been paid before the end of the agreed payment period.

An IVA can be settled early. However this will require you to offer a cash lump sum instead of your ongoing payments.

What if you earn Overtime or a Bonus

A one off overtime or a bonus payment is not regarded as a permanent pay increase. The extra money you get will not necessarily be replicated in following months. As such these payments are treated differently.

Where the overtime or bonus is 10% or less of your normal monthly take home pay you can keep the extra money. However where it exceeds 10% you must pay 50% of the excess into into your IVA.

In other words if your normal take home pay is £1000 and you earn up to an extra £100 (10%) in any particular month you can keep this money. However if you earn £300 more you keep £200. The other £100 must be paid into the agreement.

You must tell your IVA Company within 14 days if you earn overtime or receive a bonus.

Unhappy that your IVA payment has gone up after a pay increase? For free confidential advice, give us a call (0800 011 4712) or complete the form below.

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62 thoughts on “Pay Increase during an IVA”

    Anita says:
    28/03/2019 at 09:56

    I am retired and just been awarded additional pension credit – is this disregarded as income in my IVA similarly as the DLA benefit I receive?

    Reply
      James Falla says:
      28/03/2019 at 10:01

      Hi Anita

      A pension credit is regarded as income in your IVA. It is not the same as DLA. As such if you are now receiving an increase in your income due to a new pension credit you must inform your IVA company of this. They will need to assess the impact of this on your income and expenses budget. However your payments could increase as a result of the change.

      Reply
    Nikki says:
    10/04/2019 at 18:21

    Hi, my husband possibly has a chance of a new job, the pay will increase substantially. We are currently in a joint IVA (for the past 18 months) and pay £70 per month. My husband currently earns around £23000 per year, this possible job could earn £49000, he would be living away from home for 9 days out of 12. How would this affect our current IVA? Very confused on how this would work.
    Thanks

    Reply
      James Falla says:
      10/04/2019 at 18:52

      Hi Nikki

      If your husband gets this pay increase it will almost certainly mean an increase in your IVA payments. Because the household income would permanently change you would need to submit a new income and expenditure budget to your IVA company.

      You would need to include your husband’s new take home amount in the income section and any changes / increases to your living expenses in the expenses section. These new figures are then used to calculate a new new household surplus income.

      The new surplus income will be what you have to pay into your IVA going forward. If this new surplus figure is larger than the amount you are currently paying then by definition your payments will go up.

      Reply
    Sally bartholomew says:
    28/04/2019 at 01:29

    Just wondered if you can put my mind at rest my husband has been doing a lot of overtime he has no choice it’s in his contract I was told that he can earn 320 a month overtime if he goes over that will he have to pay back in a lump sum or will they put his fee up every month

    Reply
      James Falla says:
      29/04/2019 at 12:04

      Hi Sally

      If your husband has been told he can keep overtime up to £320/mth then I assume his normal take home salary is £3200. The terms and conditions of a standard IVA will state that any overtime earned in a particular month can be kept as long as it is no more than 10% of the normal take home pay.

      Given this if he earns over £320 in any particular month he MUST inform his IVA company. They will normally require 50% of the extra to be paid into the arrangement.

      As overtime is an ad hoc event then it does not usually affect the standard monthly payment. However it must be reported every time it is earned so the IVA company can check to see if any extra needs to be paid to them.

      My advise is to check with the IVA company every month your husband earns overtime to make sure nothing more is owed.

      Reply
    Karlos says:
    28/05/2019 at 11:01

    Good Morning,

    I have applied for an IVA 2 months ago and I already perform 2 payments of £148. My total Debit was £17.000

    My income has changed due to the increase in the Tax Free allowance 2019/2020. Also, I have cancelled my private pension scheme.

    Do I have to inform right now those details to my IVA Company? (Maybe I can inform it on my early review?). I had £100 increase in my salary after taxes.

    Thanks in advance

    Reply
      James Falla says:
      28/05/2019 at 11:10

      Hi Karlos

      You should inform your IVA company about these changes in your income straight away. They can then adjust your monthly payments immediately. If you wait for your annual review (in approx 10 months) you will have 10 months of under payments. These “arrears” will have to be paid back. This could mean your monthly payments go up even more or the length of your IVA has to be extended.

      Reply
    Becky says:
    13/06/2019 at 15:02

    Hi,

    I am very worried about my annual review. I have been in my IVA for 3 years, last year I got a pay day loan and a credit card. One for 1000 and the credit card for £500. I am on a much higher wage now, as I was a student then but am now a qualified teacher, I have never missed a payment for my IVA. But am I at risk of them cancelling my IVA for these reasons?

    Since looking into this, I was wondering if it would be better for me to take the debt back on myself and arrange payments with my creditors. Will this obliterate my credit score? I want to be able to get a mortgage in the next few years, and am just worried that I would never be able to get this.
    Thank you

    Reply
      James Falla says:
      13/06/2019 at 15:16

      Hi Becky

      As you know you should not have borrowed more money during your IVA without first getting the agreement of your IVA company. However the debts are relatively low so this should not be too much of a problem to sort out. Your IVA company will probably be reluctant to allow you to include them in the Arrangement. However you could ask for a payment break, pay them off and then start your IVA payments again. The missed ones are added to the end.

      I would say that the increase in your income is more of an issue. As discussed in the article above it will mean your IVA payments will go up. Your IVA company will go through a new income and expenses budget with you and 50% of any extra disposable income you have will have to be added to your payments.

      This is what you signed up for in your IVA and is fine as long as the amount you will now repay is still less than or equal to the original amount of debt you owed. However if you are now facing paying more into your IVA than you originally owed you have to ask yourself if it is worth carrying on.

      If you decide to you could stop your IVA and pay your debts yourself. However you need to think very carefully about this. As you have already paid for 3 years you are going to be throwing away a lot of hard work and money. Much of your payments are likely to be taken by your IVA company to pay their fees and so your total debt is probably going to be similar to what you owed when you started.

      In terms of getting a mortgage even if you stop he IVA the record of it will remain on your credit file for 6 years from the start date. You will not be able to get a mortgage until it comes off. As such stopping your IVA half way through will not help you at all in this regard. You will normally always have to wait until the record comes off your file.

      Reply

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