Income Payment agreement - quick question

catewithers

We've had letters from the OR saying that they've prepared an IPA. The details are that while we're on a nil tax code we pay the money that would have been paid in tax over to the OR as a contribution to our creditors.

Is this normal? I thought an IPA meant that we would pay a proportion of our disposable income after tax.....

Bit confused, seems too good to be true!!

ClaireLR

Hi Cate,

I have an IPA like this too, I have to pay my tax to the OR instead of to the taxman. I couldn't get my head round it at first, I thought the taxman would take precedent over the OR but apparently not.

The OR sent me a letter telling me who would be dealing with collecting the money, then that company contacted me and I made a debit card payment, followed by a standing order being set up. Now it gets taken every month without me having to think about it.

They can only take it until 31 March next year, after that your tax code will revert back to normal and the taxman will get the payment as normal.

HTH

Claire

tigerfeet2006

Cate everyone who pays tax will have an IPA like this. Just make sure you keep the money to one side for when the trustee asks for it.

catewithers

Thanks guys - I understand that bit - Just that I thought we would ALSO be paying a proportion of our disposable income as well....

fermi

Yep. Tax based and income based IPA's are different creatures.

An IPA based on the NT code can't be extended to include disposable income without going through the whole process involved in setting up a new IPA. So having a NT code IPA is nothing to panic about.

catewithers

Thanks Fermi - not panicking as such, just confused as it wasn't what we were expecting.

So do you think it's likely that they'll go through the whole process again to set up an income based IPA? We do have approx £400 disposable income every month...

And another thing, if you only have a nil tax code until the end of the tax year, what happens then? And why is that?

Bakeybadoo

I wouldn't get too excited, just yet...

My OH had a nil tax code IPA, thought that was it but he then got a letter saying he will also have a disposable income IPA of £75pcm on top of that.

You're very fortunate if you have £400 excess per month and don't get one. We are in the negative every month (having NO disposable) but the OH has imposed the disposable IPA anyway.

I hope you're getting just the nil tax code though! Oh yes and you're in the same OR area as me, on a side note!

catewithers

Well like I said - it certainly wasn't what we were expecting! We were absolutely expecting to have an IPA for our disposable income. I thought it would all just be in the same thing rather than one for tax and then a different one for income.

We'll be keeping an eye out for the next letter then.