I have been told that I have been overpaid. What can I do?

Once you know that HMRC think that you have been overpaid you have different options depending on whether they are asking you to pay the money back straight away or taking it from your tax credits.

If HMRC have sent you a letter asking for the money back straight away, look at A below. If HMRC are taking money back from your tax credits, have a look at B.

A - HMRC are asking for the money back straight away

If HMRC want the money back straight away (they call this ‘direct recovery’), they normally send you a letter. The letter will tell you that you were paid too much. It should also tell you the amount you have to pay back. If you get a letter like this, you have several options.

1. If you don’t agree that HMRC should ask you for the money back (perhaps because the overpayment was caused by their mistake or because they didn't change your award when you told them your situation had changed), you can write to them and ask them to think again. This is called a ‘dispute’. See I don’t think I should pay the money back: the dispute process. HMRC will not stop asking for the money while they look at your dispute. You will need to talk to Debt Management about repaying the overpayment if you have received a letter asking for it directly. See Repaying the overpayment. If your dispute is successful you should get any payments you have made refunded to you. There are time limits affecting how long you have to start a dispute. For information about time limits for disputes see Appeals and disputes.

2. If you think HMRC are wrong about the amount of tax credits they have given you, and that you weren't overpaid or that your overpayment is less than HMRC think you can appeal the decision. An appeal is when you ask HMRC to look at this kind of decision again. For more information about appeals see Appeals and disputes and How to appeal. If you do this, HMRC will stop asking for the money they say you owe them until they have investigated and replied to you. There are strict time limits for appeals. For more information about time limits for appeals see Appeals and disputes.

3. You can start an appeal and a dispute at the same time if you are not sure which route is the right one to take or if your overpayment has more than one cause.

4. If you agree that the overpayment should be paid back but cannot afford it, you should still speak to HMRC straight away. See I can't afford it.

5. Accept the overpayment and agree to pay it back. You should contact HMRC directly about how to do this. See Repaying the overpayment.

6. If you have an overpayment because you were late telling HMRC about a change in your circumstances, for example, your partner moving in or out and you went on to make a new claim then you may be able to get your overpayment reduced. See Appeals and disputes for more information.

7. Get advice to help you decide what to do. See How to find an adviser - tax credits.

B - HMRC are taking back the overpayment from my tax credits

If your tax credits have gone down or stopped, HMRC might have started taking money back to repay an overpayment. If this has happened, you won't receive a letter telling you that you have an overpayment. Instead your award notices will show the overpayment and how much HMRC are taking back from you. 

If you cannot find the information about your overpayment on your award notice, try and get some help from an advice agency or contact the tax credit helpline. Even though HMRC have started collecting the money there are still things you can do.

1. If you don’t agree that HMRC should ask you for the money back (perhaps because the overpayment was caused by their mistake or because they didn't change your award when you told them your situation had changed), you can write to them and ask them to think again. This is called a ‘dispute’. For information about disputes, see I don’t think I should pay the money back: the dispute process. HMRC will not stop asking for the money while they look at your dispute. See Repaying the overpayment. If your dispute is successful you should get any payments you have made refunded to you. There are time limits affecting how long you have to start a dispute. For information about time limits see Appeals and disputes.

2. If you think HMRC are wrong about the amount of tax credits they have given you, and that you weren't overpaid or that your overpayment is less than HMRC think, you can appeal the decision. An appeal is how you ask HMRC to look at this kind of decision again. If you do this, HMRC will stop asking for the money until they have investigated and replied to you. There are strict time limits for appeals. See Appeals and disputes.

3. You can start an appeal and a dispute at the same time if you are not sure which route is the right one to take or if your overpayment has more than one cause.

4. Ask HMRC to take less money from your tax credits if the reduction is causing you difficulty. For more information on what to do if you cannot manage with lower payments see I can't afford it.

5. Do nothing. HMRC will continue reducing your tax credit payments until the overpayment is paid back.

6. Get advice to help you decide what to do. See How to find an adviser - tax credits. 

"I was paying money back from my tax credits, but now I've received a letter asking for the money straight away. Why?"

Couple hugging toddlerThis normally happens because your tax credit claim has ended for some reason. This might be because you have become part of a couple or you are no longer working. It can also happen if your income increases so that you no longer receive any payments. HMRC call this a 'Nil award'.

Once a claim ends, HMRC will normally ask you to repay the money straight away. In some cases, if you have made a new claim, they might be able to recover the money from your new claim by reducing your payments.

Your tax credit claim might have ended because:

  • Your child has left home
  • Your child has left full time education
  • Your child has died
  • You have stopped being part of a couple
  • You have become part of a couple
  • You or your partner went abroad for more than 8 weeks, or 12 weeks in some circumstances
  • You were no longer working enough hours to qualify
  • You no longer have a ‘right to reside’ in the UK
  • You did not send back your renewal forms, or your forms have been lost.

If you have more than one overpayment

You might have more than one overpayment. This could be from an old, different claim or from an earlier year on your current claim. If HMRC are taking money from your latest tax credits claim for one overpayment, they might write to you directly and ask for money for another overpayment from an older claim. HMRC will put the older overpayment recovery on hold until you have repaid the first overpayment from your ongoing payments, but you must ask them to do this. It won’t happen automatically. If you think this should apply to you, contact Debt Management using the phone number on the letter asking you to pay the money back. Ask them to stop asking you for the money from your old claim until you have finished paying back the overpayment on your latest claim.

"My tax credits claim has stopped and I have claimed universal credit instead. What happens to my tax credits overpayment?"Woman in headscarf standing at the door of her house

Universal Credit is gradually replacing some benefits including working tax credit and child tax credit. If your tax credits stop and you claim universal credit, then HMRC will pass your tax credit overpayment over to the Department for Work and Pensions (DWP) who deal with universal credit. They will reduce your universal credit to pay back the tax credit overpayment.

The process of moving from tax credits to Universal Credit may cause an overpayment which you will have to pay back as well as any other tax credit overpayments you may have.

If you have moved to Universal Credit, HMRC should write to you with a letter called ‘Your tax credits overpayments’ (TC1131). This should tell you your tax credit debt will be moved over to DWP and collected from your Universal Credit award. If you have more than one overpayment, the debts may be moved across at different times and so you may receive more than one letter.

If you are repaying an overpayment to HMRC or one of their private debt collection agencies because you set up a time to pay arrangement, this will automatically be stopped.

Once the overpayment has been passed to the DWP, then you will need to arrange repayment with them even if you stop claiming universal credit at some point in the future.

Taking away your possessions or court action

Sometimes, HMRC will write to you saying that they plan to take away some of your possessions and sell them at auction. This is called ‘taking control of goods’ or ‘distraint’. If this happens, you should contact HMRC straight away. Ask them to stop taking this action if it is not too late and talk to them about setting up a re-payment plan. See Paying the overpayment.

Sometimes, instead of taking your things, HMRC might take you to County Court. If you have received a letter from HMRC which says that they are taking you to court or you have received court papers then you should contact HMRC straight away. Ask them to stop the court action if it is not too late and talk to them about setting up a re-payment plan. See Paying the overpayment.

This will give you time to look at the rest of this guide and decide what to do. If it is too late and the case has already gone to court you should get advice as soon as possible. See How to find an adviser

 

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