In an IVA, a windfall is any unexpected lump sum you receive that wasn’t part of your original proposal. This includes inheritances, PPI compensation, lottery wins, redundancy payments, insurance payouts, and tax rebates.
You must declare any windfall to your Insolvency Practitioner immediately. What happens next depends on the size of the windfall and how much you still owe.
Common Types of Windfalls#
Inheritance#
Money you receive from a deceased relative’s estate counts as a windfall. This includes cash, the proceeds from selling inherited property, or your share of assets.
Even if the inheritance goes straight to your bank account, you cannot keep it without declaring it.
PPI and Mis-Selling Compensation#
Payment Protection Insurance (PPI) refunds and other mis-selling compensation (packaged bank accounts, unnecessary insurance, etc.) are windfalls.
These can be substantial—sometimes tens of thousands of pounds. If you receive one during your IVA, it must go to your IP.
Lottery and Gambling Wins#
Any lottery, premium bonds, or gambling wins over £500 typically count as a windfall. Smaller wins (under £500) may be treated differently depending on your IVA terms, but it’s safer to declare them anyway.
Redundancy Payments#
This is more complicated. Statutory redundancy pay is often exempt because it’s considered compensation for job loss and you’ll need it to cover essential living costs while finding new work.
However, enhanced redundancy packages—anything above the statutory minimum—usually count as a windfall.
Your IP will assess this on a case-by-case basis. If you’ve already secured new employment before receiving the redundancy payment, they’re more likely to claim it for the IVA.
Insurance Payouts#
Insurance payouts can be windfalls, but it depends on the type:
- Critical illness or personal injury: Often excluded if the money is needed for medical treatment or disability-related costs
- Life insurance (if you’re the beneficiary): Usually treated as a windfall
- Home or car insurance: If the payout is to replace a necessary asset (your car, essential household items), it may be excluded
Always declare the payout and let your IP make the determination.
Tax Rebates#
HMRC tax rebates—whether from overpaid PAYE, self-assessment refunds, or tax code changes—are windfalls.
Even if it’s money you technically overpaid, it’s still an unexpected lump sum that must be declared.
Gifted Money#
If a family member or friend gives you a significant sum of money (usually over £500), this counts as a windfall.
It doesn’t matter that it’s a gift. If it comes into your possession during the IVA, it must be declared.
What Happens When You Receive a Windfall?#
You must tell your IP as soon as you receive or become aware of a windfall. They’ll assess it and decide what happens next.
If the Windfall Exceeds Your Remaining Debt#
Your IVA ends immediately. The windfall clears the outstanding balance, including IP fees. Any surplus is returned to you.
For example, if you owe £8,000 and receive a £15,000 inheritance:
- £8,000 pays off the IVA
- £7,000 is returned to you
- Your IVA is marked as “complete”
If the Windfall Is Less Than Your Remaining Debt#
The windfall is paid into the IVA, reducing the outstanding balance. Your monthly payments continue as normal unless the windfall brings you close enough to the end that a variation can be proposed.
For example, if you owe £15,000 and receive a £5,000 PPI refund:
- £5,000 goes to creditors
- You still owe £10,000
- You keep making monthly payments until completion
The windfall may shorten your IVA, but it doesn’t automatically end it early.
The £500 Threshold#
Most IVA terms state that windfalls under £500 don’t need to be declared or paid in. This threshold exists to avoid administrative burden for very small sums.
However, some IPs set the threshold higher or lower, so check your IVA agreement.
Can You Hide a Windfall?#
No. And you shouldn’t try.
Your IP has a legal duty to investigate your financial affairs. They can:
- Review your bank statements during annual reviews
- Request information from HMRC
- Check with creditors and credit reference agencies
- Ask you direct questions about any unusual deposits
If they discover an undeclared windfall:
- Your IVA fails
- You owe the original debt again, plus interest
- Creditors can resume legal action
- Your IP reports the breach, which can lead to bankruptcy proceedings
- In serious cases, you could face fraud charges
Hiding a windfall is considered a breach of your legally binding agreement. It’s not worth the risk.
How the 2025 Protocol Changed Windfall Handling#
The 2025 IVA Protocol gave supervisors more discretion in handling windfalls. They can now:
- Make faster decisions without always needing a variation meeting
- Apply more flexibility to redundancy payments
- Consider individual circumstances when assessing whether insurance payouts should be excluded
This means windfall handling is generally quicker and less bureaucratic than it used to be.
What If You Disagree with Your IP’s Decision?#
If you think your IP is being unreasonable about a windfall (for example, claiming a critical illness payout that you need for medical care), you can:
- Request a review: Ask your IP to reconsider, providing evidence of why the windfall should be excluded
- Escalate to their complaints procedure: All IPs have a formal complaints process
- Contact the Insolvency Service: If you believe your IP is acting improperly, you can report them
However, in most cases, the IP’s decision is final. They’re bound by the terms of your IVA agreement and their professional obligations.
Frequently Asked Questions#
What happens if I don’t declare a small windfall like a £200 tax rebate?#
If it’s under your IVA’s threshold (typically £500), you usually don’t need to declare it. However, it’s safer to inform your IP anyway. If they discover it during a bank statement review and you didn’t declare it, they may view it as non-cooperation, even if it was under the threshold.
Can I use part of a windfall for essential repairs (like a broken boiler)?#
Generally, no. The windfall must go to the IVA in full. However, if you have a genuine emergency (broken boiler in winter, essential car repairs for work), discuss it with your IP immediately. They may allow you to use a small portion, but you must get their permission first.
What if I receive an inheritance but the estate hasn’t been distributed yet?#
You must declare the expectation of an inheritance as soon as you know about it, even if you haven’t received the money yet. Your IP may extend your IVA to capture the inheritance when it arrives, or they may require you to make a lump sum payment once the estate is settled.
Are redundancy consultation payments (before actual redundancy) a windfall?#
No. Payments you receive while still employed (consultation payments, notice period pay) are usually treated as income, not windfall. The redundancy payment itself—received after employment ends—is what counts as a potential windfall.
What happens if I receive multiple small windfalls that add up to more than £500?#
Each windfall is assessed individually. If you receive three £300 tax rebates throughout your IVA, each one is under the threshold. However, if your IP notices a pattern of undeclared lump sums, they may investigate whether you’re trying to circumvent the windfall clause.
Need Help Understanding Your IVA?#
If you’re not already in an IVA but think it might help with your debt, use our free IVA calculator to see if you qualify. It takes 2 minutes and won’t affect your credit score.
For more information on how IVAs work, read our guide: What is an IVA?
If you’re considering ending your IVA early with a lump sum, see our guide: Can You End an IVA Early?