One of the biggest worries people have about an IVA is whether they'll have enough left to live on. The short answer is that an IVA is built around your essential living costs, not the other way round. Your monthly payment is only worked out after your household's reasonable spending on things like rent, bills, food, travel and a modest amount for socialising has been set aside.
This guide explains how IVA living expenses are worked out, the spending guidelines providers use, what's normally allowed, and what happens if your costs change while your IVA is running.
The short answer
- Your IVA payment is what's left after your essential living costs have been covered.
- Most providers use the Standard Financial Statement (SFS) and its spending guidelines to check your budget is reasonable.
- Fixed bills like rent, mortgage, council tax and energy are usually counted at what you actually pay.
- Flexible costs such as food, clothing, phone and leisure are compared against guideline amounts for a household like yours.
- Your budget is reviewed every year, and your payment can go down if costs rise.
How IVA living expenses are worked out
Before an IVA proposal goes to your creditors, an insolvency practitioner goes through a full income and expenditure budget with you. It lists everything coming in, including wages, self-employed income, benefits, pensions and maintenance, against everything going out. The difference between the two is your surplus, and that's what forms the basis of your monthly IVA payment. Our guide to how IVA monthly payments are worked out covers this step in more detail.
Your creditors vote on the proposal, so the budget has to be realistic on both sides. If spending looks unusually high, creditors may question it or reject the proposal. If it's set too tight, you're likely to struggle to keep up payments over five or six years, which helps nobody.
The Standard Financial Statement
Most IVA providers, and most free debt advice services, use the Standard Financial Statement (SFS). It's a common budgeting format that creditors recognise and accept. Alongside the format itself, the SFS publishes spending guidelines, sometimes called trigger figures, for flexible spending categories. These are based on what households of a similar size and make-up typically spend, and they're updated periodically to keep pace with the cost of living.
The guidelines aren't hard caps. If your spending in one area is above the guideline, that's fine if there's a genuine reason, such as a health condition, a long commute or a special diet. It just needs explaining.
What's included in your IVA budget
Your budget is split into fixed costs, which are counted at what you actually pay, and flexible costs, which are compared against the spending guidelines.
Fixed and priority costs
- Housing: rent or mortgage, plus any secured loan repayments and ground rent or service charges
- Council tax and water
- Gas and electricity
- Insurance: buildings and contents, life cover where appropriate, and car insurance
- Childcare and child maintenance you pay
- TV licence
Flexible costs (checked against spending guidelines)
- Food and housekeeping: groceries, toiletries, cleaning products, nappies and school meals
- Communications and leisure: mobile phones, broadband, TV packages, hobbies, socialising and gifts
- Personal costs: clothing and footwear, haircuts, prescriptions, dental and optical costs, and pet care
- Travel: car running costs or public transport, including travel to work
- Home and contents: repairs, replacing household items and furniture
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What's normally allowed during an IVA
Living on an IVA budget means being careful, but it doesn't mean cutting out everything. Here's how some common questions are usually handled.
- Socialising and hobbies: a modest amount is allowed, as it's treated as a normal household cost.
- Holidays: there's no rule against them, but they need to be paid for from your living-expenses budget or by someone else.
- Your car: reasonable running costs are usually included if you need a car. A high-value car or costly finance deal may be questioned. See buying a car during an IVA.
- Pets: reasonable food, insurance and vet costs are normally included.
- Phone and TV subscriptions: normal phone and broadband costs are fine. Several premium TV or streaming packages are more likely to be questioned.
- Saving: any savings you build up should come from your agreed budget. Money above it is usually expected to go into the IVA.
What happens if your income or costs change
Your IVA budget isn't fixed for the whole term. Every year your insolvency practitioner carries out an IVA annual review, where your income and outgoings are checked again. If your essential costs have risen, perhaps because of higher energy bills, rent increases or a new baby, your payment can be reduced. If your income has gone up, you may be asked to pay more, though most IVAs let you keep part of any increase.
You don't have to wait for the annual review. If your circumstances change suddenly, contact your practitioner straight away. Under the current IVA Protocol, your supervisor can agree some payment reductions and short payment breaks without needing to go back to creditors. If you're already finding payments hard, read what to do if you can't pay your IVA.
Extra income, bonuses and windfalls
Occasional overtime, bonuses and one-off sums are usually handled separately from your regular budget. Most IVAs set an agreed threshold, and a share of anything above it goes into the arrangement. Larger amounts such as an inheritance must be reported. Our guide to IVA windfalls and inheritance explains how this works.
Tips for living on an IVA budget
- Be accurate from the start. Underestimating your real costs to make a payment look bigger is one of the most common reasons IVAs run into trouble later.
- Keep your bills and statements. They make annual reviews quicker and support any spending that's above the guidelines.
- Build in irregular costs. Car servicing, school uniforms, birthdays and Christmas should be spread across your monthly budget.
- Ask for help early. If a cost goes up, telling your practitioner promptly is far better than missing a payment.
The key takeaway
An IVA budget is designed to cover your household's reasonable living costs, with your payment taken from what's genuinely left over. Spending guidelines help keep things fair for you and your creditors, but they leave room for real-life circumstances. If you're worried about whether you could manage on an IVA budget, or whether another solution might fit your situation better, it's worth getting your options checked. For free, independent budgeting help you can also use StepChange or National Debtline.
Common questions
How much money will I have to live on in an IVA?
There's no fixed figure. Your essential living costs are worked out from your own household's income and outgoings, using spending guidelines that reflect what similar households typically spend. Your IVA payment is what's left after those costs, so the budget is built around what you genuinely need.
What spending guidelines are used for IVA living expenses?
Most IVA providers use the Standard Financial Statement (SFS), a budgeting format used across the UK debt advice sector. It sets guideline amounts for flexible costs such as food, clothing, phone and broadband, travel and leisure, based on the number of adults and children in your household.
Can I go on holiday during an IVA?
There's no rule against holidays. The cost needs to come from your agreed living-expenses budget, or be paid for by someone else, rather than from money that should be going into your IVA.
Can I keep my car in an IVA?
Usually, yes, if you need it for work, school runs, health reasons or because public transport isn't practical. Reasonable running costs such as fuel, insurance, tax and servicing are normally included in your budget. A very high-value car or expensive finance agreement may be questioned.
Can I spend money on socialising and hobbies in an IVA?
Yes. A modest amount for leisure, socialising and hobbies is treated as a normal household cost, because a budget with no room for any life outside bills is unlikely to last five or six years.
What happens if my living costs go up during my IVA?
Tell your insolvency practitioner as soon as possible. Your budget is reviewed every year, and if your essential costs have risen your monthly payment can be reduced. Your supervisor can also agree some payment reductions and short payment breaks without going back to creditors.
How IVA Advice Online can help
We'll go through your income and outgoings with you and show you how an IVA budget would look for your household, so you know what you'd have to live on before you decide anything. To talk through your options, get in touch.