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.

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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”

    Louise says:
    28/10/2019 at 17:45

    We are currently in an IVA. We are struggling at the moment and I’m looking to try and get into employment. If I were to gain employment, how much would have to be paid into the IVA

    Reply
      James Falla says:
      28/10/2019 at 17:54

      Hi Louise

      If your income increases during an IVA all the extra you earn does not automatically have to be paid into the Arrangement.

      Your IVA company will first ask you to complete a brand new income and expenses budget to see if your disposable income has changed. This means they take into account any reduction in income due to to a reduced benefits or increase in expenses a result of your new job (for example extra travel costs).

      Once the new disposable income is calculated your payments will only increase if the amount is higher overall and then only by 50% of the increase. So if your original payment was £100/mth and your new disposable income is £200/mth your payment will go up by 50% of the difference to £150/mth.

      Reply
    Mark says:
    18/02/2020 at 19:57

    I have been in an IVA for four years, and although it’s been a struggle at times I have never missed a payment. I have struggled to find a job that I am happy in but have recently joined a company that I want to stay with. Part of the salary will be commission and I am concerned that the IVA company will expect to take all of the commission that I earn.

    I have two years left on the IVA and if they are going to take it all I am concerned that it will effect my efforts at work. Is there a maximum that they can take?

    Reply
      James Falla says:
      18/02/2020 at 20:05

      Hi Mark

      There are specific rules to follow if you earn commission (or bonuses or overtime) during an IVA. They work as follows:

      Out of any extra you take home in any particular month you are allowed to keep the equivalent of 10% of your normal take home salary. If the amount you have earned is more than this then the extra is split 50/50 between you and your IVA. As such if your normal take home is £1000 and you earn commission of £200 in any particular month, you keep the first £100. The second £100 is split 50/50. You would have to pay £50 extra into your IVA that month.

      Reply
    Mark says:
    19/02/2020 at 12:51

    Many thanks James for the reply.

    My IVA company are telling me it will increase my monthly payments based on the average of each quarter. This is different to what you have said. Are there different agreements in place or should all IVAs the same?

    Reply
      James Falla says:
      19/02/2020 at 12:53

      Hi Mark

      The advice I gave previously is correct if you are going to be earning ad hoc or one off commission / overtime payments.

      However if you will be regularly earning commission every month or quarter then yes this will trigger a whole new review of your income and expenses budget.

      If your average income has increased meaning your average monthly surplus income is higher then yes a new increased monthly payment will be required based on the higher surplus amount.

      Reply
    Tim says:
    24/06/2020 at 12:35

    Hi
    With covid 19 going on I took a mortgage break and have saved some money up. As I have been working all the way through.Its my review can my iva take all the money I have save due to this

    Reply
      James Falla says:
      24/06/2020 at 12:42

      Hi Tim

      Most IVA companies will let you keep any money you have been able to save from your agreed living expenses budget. Given your mortgage payments are part of this budget it follows that if you wish you should not be able to keep this as legitimate savings. That said, if you have been working all the way through and still have the money, I would strongly advise you to call your mortgage company and offer to pay them the lump sum to catch up on the payments you have missed. This should be perfectly acceptable.

      Reply
    Rose says:
    30/06/2020 at 13:54

    I am on furloughed now when I start getting my normal pay will i pay the same as I am paying now?

    Reply
      James Falla says:
      30/06/2020 at 14:25

      Hi Rose

      I assume you have been on a payment break from your IVA while you have been furloughed? If so after you get back to work, and given your pay has not changed, your IVA payments should also stay the same. The payments you have missed are normally just added to the end of the arrangement.

      The only time your payments should go up is if your income increases or your expenses fall meaning your surplus income has increased and you can afford to pay more.

      Reply

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