Can you get an IVA on benefits or Universal Credit?
It is possible, but often not the best fit. The IVA Protocol says people whose main income is state benefits or the state pension might not be suitable for a standard IVA. If your household has earnings as well as benefits, such as Universal Credit, the question is whether there is a surplus that will last five or six years.
No law stops you getting an IVA because you are on benefits. But an IVA only works if you can pay a steady amount every month for five or six years, and the standard framework most IVAs follow treats benefits-only income as a warning sign. For many people whose income is mainly benefits, another route is a closer fit.
IVAs are available in England, Wales and Northern Ireland. If you live in Scotland, see debt solutions in Scotland.
What does the IVA Protocol say about benefits?
The IVA Protocol 2025 sets out who a standard (“protocol”) IVA usually suits. It says a suitable person will usually have “a regular sustainable income other than State benefits or State pension”. It then says:
“Consumers who rely on State benefits or State pensions as their primary income might not be suitable for a protocol IVA. The Nominee must explore why they receive these benefits and if they will continue to receive them throughout the IVA period.”
The key facts document you get before signing a protocol IVA repeats the point: an IVA may not be the best solution if your “income is mainly made up of benefits”.
This is guidance, not a legal rule. It means the insolvency practitioner has to look hard at whether your income is stable, and the Protocol also says a protocol IVA is not suitable for people with very low disposable income unless the proposal explains why it is the most suitable option. If you would qualify for a debt relief order, the Protocol says you are unlikely to be suitable for a protocol IVA at all. Our guide to who qualifies for an IVA covers the rest of the profile.
How are benefits counted in an IVA budget?
Your budget is drawn up using the Standard Financial Statement and covers your whole household where appropriate. The Protocol says all state benefits are counted as income, including Universal Credit, child benefit, pensions and benefits for ill health, disability or caring. Where disability or caring benefits are counted, all the costs relating to that disability or caring must be included as expenses too.
So the question is not whether you get benefits, but what is left once your household’s essential costs are paid. Our guide to how much an IVA leaves you to live on explains how that budget is built.
Universal Credit deductions
If money is already being taken from your Universal Credit, for example to repay an advance or an overpayment, your budget has to be based on what you actually receive. Overall deductions are capped at 15% of your standard allowance, although some “last resort” deductions, such as child maintenance, rent arrears and gas or electricity arrears, can go above that cap. Ask the insolvency practitioner how any deductions will be treated. DWP Debt Management explains how these debts are collected.
Why does benefits-only income rarely suit an IVA?
- The surplus is usually small. With little left each month, fees take a large share of what you pay. Citizens Advice says IVA fees are around £5,000 on average.
- Benefits can change. Reassessments, a child leaving home or a change in your health can alter your income, and the IVA has to last five or six years.
- A failed IVA costs you. If it ends early, you get no refund, creditors can chase the rest of the debt, and they can add back the interest and charges that were frozen.
For example, if you had £60 a month to spare, you would pay £3,600 over 60 months. That is less than the average fee Citizens Advice quotes, so very little might reach your creditors. (Hypothetical figures.)
What if your household has earnings as well as benefits?
Many people on Universal Credit are working. An IVA can be more realistic where earnings make up a good part of the household’s income and the budget still leaves a steady surplus after essential costs.
Points the insolvency practitioner should look at:
- whether your earnings are regular, or whether you are self-employed or work irregular hours, which the Protocol says must be noted in the proposal
- changes likely during the IVA, such as child benefit stopping when a child turns 18
- your partner’s income and contribution to household costs, because the budget covers the whole household where appropriate
Once an IVA is running, extra money counts too. Overtime or a bonus worth more than 10% of your normal take-home pay has to be declared, and half of the amount above that 10% goes into the IVA. See pay rises, bonuses and windfalls.
Want to know whether an IVA could work for you? Answer a few questions about your debts and income. It takes about 3 minutes, and it is free and confidential.
What are the alternatives if your income is mainly benefits?
| Option | Key points |
|---|---|
| Debt relief order | For debts under £50,000, less than £75 a month spare, assets under £2,000 and a vehicle under £4,000. No fee. Usually lasts 12 months. You apply through an approved debt adviser. |
| Debt management plan | Informal, so creditors do not have to freeze interest or stop action. Free plans are available from StepChange, PayPlan and National Debtline’s partner. |
| Bankruptcy | £680 to apply, which cannot be waived. If your main income is state benefits, you would not normally be asked to make monthly payments from it. |
| Breathing Space | Up to 60 days in which creditors cannot add interest or charges or take enforcement action, through an FCA-authorised debt adviser. |
A debt relief order is the closest match for many people on benefits with few assets. It is free, it is short, and the Protocol itself says people who meet the DRO criteria are unlikely to suit a protocol IVA. Our guides to debt relief orders and IVA or debt relief order? compare them in detail.
Some debts cannot go into any of these, such as magistrates’ court fines, child maintenance and student loans. Those stay your responsibility whichever route you take.
What to do next
- Work out your household’s real income, including every benefit, and your essential spending, using your bank statements.
- Before speaking to any IVA firm, get free, impartial advice from MoneyHelper, StepChange, Citizens Advice or National Debtline. They can check whether you qualify for a DRO and compare every option. See where to get free debt advice.
- If you are offered an IVA and your income is mainly benefits, ask the insolvency practitioner to explain in writing why it is more suitable than a DRO or a debt management plan. The proposal should say why.
- For more on how IVAs work, go back to IVAs explained.
Common questions
Will my benefits be used to pay my IVA?
Benefits count as part of your household income, but your IVA payment comes only from what is left after your essential costs. If you get disability or caring benefits, the costs they relate to must be included in your budget.
Can I get an IVA if my only income is the state pension?
There is no legal bar, but the IVA Protocol says people who rely on the state pension as their main income might not be suitable for a protocol IVA, and the key facts document says the same about income made up mainly of benefits.
Do Personal Independence Payment or Carer's Allowance count as income in an IVA?
Yes. The Protocol says benefits relating to ill health, disability or caring are included as income, and that all the costs relating to the disability or caring must be included as expenses.
What if my benefits change during my IVA?
Tell your supervisor straight away. Under the standard terms they can agree payment breaks and a payment cut of 20% or less without asking your creditors. Bigger changes need a creditor vote.
Is a debt relief order free?
Yes. There has been no fee for a DRO since 6 April 2024. You apply through an approved debt adviser, not on your own.
Related guides
- Who qualifies for an IVA? Minimum debt, spare income, benefits, homeowners and the situations where an IVA rarely fits.
- IVA or debt relief order? How a DRO and an IVA compare, and why DRO-eligible people are rarely suited to an IVA.
- How much does an IVA leave you to live on? How your IVA budget is worked out, what counts as essential, and how yearly reviews change it.
- Debt relief orders: who qualifies and how they work A free 12-month order that writes off debts for people with low income and few assets.