IVA, new job and pay increase

[Crunchi1987]

Hi i have a IVA through Creditfix and i currently work for the Local Authority and earn £27000 yearly, i am contemplating leaving this post to go agency, which would mean i go limited company and get paid hours £24ph, if i worked on this rate for a year and minus 6 weeks holiday the salery would be £42624, obviously none of the above takes into consideration tax, national insurance etc. I have £11719 of debt, paying £150PM at the present moment and ill pay a total of £9000 back if i remained on this income. If i get a new job i have to pay 50% of my wage increase, but i have a few questions
1) will i pay £9000 back or £11719
2) can they make me pay more then 50%
3) is this move beneficial
4) if i pay more can i clear my debt in less then 5 years and how long would i have bad credit?

If I go with this job its through PAYE and i would get around £640 per week

And how would/could me going Ltd Company affect my IVA as ill be on contract work?

Any help would be MUCH appreciated

(p.s. i am only 5 months into my IVA) [:X]

[Michael Peoples]

You would only ever be liable to repay the full debts plus costs. However, there are issues with forming a limited company and you should get professional advice and speak to your IP before you do anything. There are benefits and downsides to everything and just be aware of what these are. I presume you will be paid a salary, expenses and a dividend and the company will also have to pay Corporation Tax, PAYE and possibly VAT. This is not straightforward.

[UpToMyNeckInIt]

I will try not to duplicate what you have already been advised.

I too am ex-LA and now working self-employed/Ltd Co.

Are you going to be working under an umbrella company set up by your agency? or setting up your own company? You will usually be far better off doing the latter (trust me, I have worked both ways on a comparable hourly rate).

Assuming you are not going with the umbrella arrangement, my first bit of advice to you: GET AN ACCOUNTANT. Worth their weight in gold. Now that you are self-employed (or will be if you go ahead), you will be amazed at what you can claim tax-relief against, that you cannot as an employee, eg: mileage at 45p/mile and/or other travel expenses to/from your place of work, as well as any travel whilst you are at work (I assume you will be based from home), meals at work, and even a proportion of your gas/electric bill for running your 'home office'.

Fancy a new laptop, camera or any other equipment ...keep the receipt: it all counts as work-related expenditure, which in turn you can claim tax relief against. (May also worth you looking at going VAT-Registered as well, especially if you think you will need to get a lot of extra kit initially).

You should let your accountant know about your IVA, and instruct them to advise you on the most tax-efficient way to keep as much of your income as possible, whilst making your earnings look as small as legally possible on paper (thus minimising any increase in your IVA repayment).

Example: I typically turn-over around £50K, but after the accountant works his (totally legal, I hasten to add) magic, I have a 'taxable profit' of around £30K. It is the taxable profit that your IP will use to calculate your contribution NOT your turnover. The great part is that I get to keep the majority of that 'lost' £20K. Oh, and don't worry about National Insurance: Unless you go with the 'umbrella arrangement' you won't be paying that any more.

Realistically, working in this way, for every £1 that I turn-over (or earn 'gross'), I take home 83-86p.

My IP asks for my most recent accounts and bases my income on those. You of course will not have your first set for at least another 12 Months, so you will have to ask your accountant to produce a 'profit forecast' based on your own circumstances. Your IP should accept this, but check with them to be sure (don't for goodness sake tell them that you are going to be earning £15K more than before, because a) this will not be the case after tax, 'expenses' etc; and b) if you do, they may indeed up your repayment significantly and may do this as soon as you start contracting).

The 50% of extra income / IVA payment uplift part is interesting: Some IP's take the view that they will apply this as per your IVA (and as you have calculated). However some take the view that as your circumstances have changed drastically, ie: you were a Local Government Employee, but you are now self-employed and a Director of your own Company, and will make you complete a whole new income and expenditure calculation. They will then 'start afresh' if you like, in determining your revised, much higher IVA contribution.

This leads me swiftly on to my second piece of advice: Make full use of your 'allowances' when reviewing your IVA. Check out the Stepchange Budget Guidelines Report here.

https://docs.google.com/file/d/0B7LabJy ... edit?pli=1

Increase your 'allowances' where you legitimately can, to off-set your considerable increase in income.

Saying all that, as you have been used to earning £27K, as previously advised, budget for the worse case scenario, and put the surplus £800 or-so, aside. Either way, you should repay your original £11,700 debt, + your IP's fees, and conclude your IVA well before the 5-Year term.

Is it worth it? If you feel that there is plenty of contract work about, and the money is good, then maybe. BUT remember, you may be earning more, but you lose ALL employee benefits: pension, sick pay, holiday pay, Union Protection etc. Personally, I feel it is worth the risk, and am fortunate enough to have stayed gainfully self-employed for the last 7-Years. But I never get used to that feeling of not knowing when the next money is coming in when a contract ends.

Best of luck whatever you decide.

[Crunchi1987]

hanks for the advice-


£11,000 debt on a salary of £27,000 is low, who recommended you for an IVA?

I went through Money Managed and they advised IVA, i had a DMP but it wasnt working!!

I want to pay my debt of ASAP.

I will be going under a umbrella company through PAYE.

just a few figures i have worked out-

Currently paying £150pm and earn £27500 (before tax) on average PW with the new job ill earn £640pw, thats £2560pm over a 48 week year. Ive calculated my expenditure to around £1179PM, so i have a excess of £1381 so that divided by 2 is £690. Does that seem right? would i add on the original £150 i was paying too?

I owe £11719 and the fees are £3038 so thats £14757, ive paid off £700, so owe now £14057 so technically speaking i could have all this paid off in 20 months???

At the review following my next one, are they going to sting me for the excess money i have?? as i still come out £690 better as they can only take 50%

Sorry hurting my head, im crap with maths and i dont have a clue what i am doing and the lady dealing with my IVA decided to leave last month!!! without telling me!! so i am waiting to hear back from the company!!

Kindest Regards!!

[UpToMyNeckInIt]

Crunchie, worry not: All you owe is your original £11,700 debt + IP fees - nothing more, nothing less. (As has been clarified by your IP).

Check your IVA paperwork, where your IP's fees will be listed: £3-5K is the norm, and possibly a bit less for a 'mini' IVA like yours.

Sounds like you will be debt-free then in 18 Months or so. Well done!!! Assuming that this is the case, whilst your credit file will still be damaged for the original 6-Year duration, your details will immediately be removed from the insolvency register.

PS: The 'Umbrella' arrangement is fine short-term, (I know what a big step it is to go from 'employee' comfort zone, to relatively risky 'self-employment', and there are a whole new set of tax rules - and loop-holes to become familiar with. So anything that makes the transition more convenient is a bonus). But I'd still advise seeing an accountant, and going your own way if you are planning on making a career out of contracting. (My Umbrella firm used to charge me £30 per weekly invoice. My accountant's fees are about 2/3 of that, I claim far more in tax reliefs etc, whilst looking 'worse-off' on paper, thus helping minimise my IVA repayment).