Inheritance and Windfalls During an IVA: What You Must Declare
Published 6th November 2026·Updated 6 November 2026
Reviewed by: Reviewed for accuracy November 2026
If you receive any unexpected money during your IVA - an inheritance, lottery win, PPI refund, or work bonus - you are legally required to report it to your insolvency practitioner (IP) immediately. This is a core obligation of your arrangement. Most IVA terms require you to pay the full windfall into the IVA if it exceeds £500, though the exact threshold depends on your specific agreement.
The short answer
Key rules for windfalls during an IVA:
- You must tell your IP about any windfall above the threshold in your IVA proposal (typically £500).
- Failure to disclose is a breach of your IVA and can cause it to fail.
- The IP may require the entire windfall, or everything above a retention amount, to be paid in.
- Inheritance from someone who dies during your IVA must be reported, even if it arrives after the IVA ends.
- Regular income windfalls like overtime and bonuses are assessed differently from lump-sum windfalls.
What counts as a windfall during an IVA?
A windfall is any money you receive outside of your regular income that you were not expecting when the IVA was set up. The following are always treated as windfalls:
- Inheritance. Money, property or assets inherited from a deceased person.
- Lottery or prize wins. Any gambling or prize winnings above the threshold.
- PPI refunds. Compensation from mis-sold payment protection insurance.
- Personal injury compensation. Depending on the amount and your IVA terms, though some injury compensation is excluded.
- Redundancy payments. Statutory redundancy pay above a small retention.
- Unexpected gifts. Large cash gifts from family members.
- Tax rebates. HMRC tax refunds above the standard small-amount threshold.
Your IVA proposal will define the windfall threshold and rules specifically. Read your proposal if you are unsure.
What is not treated as a windfall?
Not everything counts. Standard wage increases are usually treated differently - your IP will review your income annually and may adjust your monthly contribution, but a pay rise does not trigger an immediate windfall payment. Benefits you were receiving before the IVA began typically remain yours.
Small gifts and occasional cash amounts below the threshold are usually ignored. However, the threshold in most IVAs is £500, so a £600 birthday gift from a parent would technically need to be reported. If in doubt, ask your IP before spending any unexpected money.
What happens to an inheritance during an IVA?
Inheritance during an IVA is one of the most significant windfalls you can receive. If a family member dies while your IVA is active, you must inform your IP immediately, even if probate takes months to settle and you have not yet received the money. The timing that matters is when the person dies, not when you receive the funds.
| Situation | Outcome |
|---|---|
| Death occurs and money received while IVA is active | Full windfall rules apply |
| Death occurs during IVA, money received after completion | Windfall rules still apply - must be declared |
| Death occurs before IVA starts but money received during IVA | Must be declared |
| Inheritance involves property (not cash) | IP will decide how to treat; may need to be sold |
If the inheritance is enough to pay off your remaining IVA debt plus fees, your IP may close the arrangement with a full settlement. This is the best possible outcome - your debts are written off and the IVA ends.
What if the windfall is a property?
Inheriting a property during an IVA is complicated. The IP cannot force you to sell a property you have inherited, but the value of the property will be assessed. If you choose to sell, the proceeds are treated as a windfall. If you choose to keep it, the IP may require you to remortgage to release some of the equity, or may treat the property equity as an asset for the purposes of the IVA.
You should inform your IP immediately if you inherit a property and take specialist advice before making any decisions about what to do with it.
What happens if you do not report a windfall?
Not reporting a windfall is a serious breach of your IVA. Creditors and IPs can and do investigate. The Individual Insolvency Register is public, and large unexplained purchases or bank deposits can raise questions during annual reviews.
If your IP discovers an undisclosed windfall, they can apply to the court to fail the IVA. If the IVA fails, your creditors can pursue the full original debts again. In serious cases, non-disclosure can be treated as fraud under the Insolvency Act 1986.
The practical advice from StepChange is straightforward: report everything and let your IP decide whether it needs to be paid in. The IP has discretion in many cases and may let you keep more than you expect.
Can you keep any of a windfall?
Your IP has discretion. The standard rule is that windfalls above £500 must be paid into the IVA in full. However, some IPs may allow you to retain a small amount for essential costs, particularly if the windfall is from a source like redundancy pay and you need funds to manage living costs while you find new work.
If the windfall is large enough to settle your IVA in full, you can negotiate a full and final settlement with your IP. This closes the IVA early and writes off any remaining debt. The IP has an incentive to agree because it ends their administrative obligations.
FAQ
How quickly do you have to report a windfall to your IP?
You should report a windfall immediately - ideally within a few days of receiving it. Do not spend any of the money before speaking to your IP. If you spend windfall money before declaring it, you have already breached your IVA terms.
What if the windfall is less than £500?
Most IVA proposals set a threshold below which windfalls do not need to be paid in. If your proposal sets this at £500, a windfall of £499 does not need to be declared. However, check your specific proposal - thresholds vary. Some are set at £250 or even lower.
Does a pay rise count as a windfall?
No. A regular salary increase is not a windfall - it is a change in income. Your IP reviews your income and expenditure annually. If your income has increased significantly, your monthly contribution may be adjusted upward at the next review. This is separate from the windfall rules.
What if the person who died had not yet changed their will?
Intestacy rules (where someone dies without a valid will) do not change the windfall obligation. If you inherit under intestacy during your IVA, the inheritance must be reported and the same rules apply. The legal route to your inheritance does not affect your obligation to disclose it.
Can a creditor find out about an undisclosed windfall?
Yes. Creditors and IPs can access financial records during the IVA. Bank statements are reviewed annually. Large unexplained deposits will be investigated. If you are concerned about a windfall you have already received and not disclosed, seek advice from Citizens Advice or a debt charity immediately.
Can you use a windfall to end the IVA early?
Yes. If the windfall is large enough, you can propose a full and final settlement to your IP. This means you offer to pay a lump sum that covers the remaining debt plus the IP's outstanding fees. If creditors agree (by the standard 75% majority), the IVA closes early and remaining debts are written off.