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

Once you know that HMRC think that you have been paid too much tax credits there are a few things you can do.

What to do next depends on whether you are being asked for the money back straight away or if they are taking money back from your tax credits.

"HMRC are asking for the money back straight away!"

If HMRC want the money back straight away, they normally send you a letter. HMRC call this ‘direct recovery’. Your letter will tell you that you were paid too much. It should also tell you the amount you have to pay back. If you have 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. What can I do? for details of how to do this. If you do this, HMRC will stop asking for the money until they have investigated and replied to you. There are no time limits for disputes.
2. If you think HMRC are wrong about the amount of tax credits they have given you, you can appeal the decision. An appeal is when you ask HMRC to look again because you think they are wrong about the amount of your tax credits, and that you weren't overpaid or that your overpayment is smaller. See How to Appeal. 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 Can I appeal or should I do something else?. You can send an appeal and a dispute at the same time.
3. If you agree that the overpayment should be paid back but cannot afford it, you should still speak to HMRC straight away. See Paying the overpayment for more information on what to do if you cannot afford to make any payments.
4. Accept the overpayment and agree to pay it back. You should contact HMRC directly about how to do this. See Paying the overpayment for more information about your options to pay back the money.
5. If you have an overpayment because you were late telling HMRC about a change like 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 Why have I been overpaid? or I was late telling HMRC about my partner for more information.
6. Seek advice to help you decide what to do. See How to make a complaint.

"HMRC are taking back the overpayment from my tax credits"

If your payments have gone down, HMRC might have already started to take money from your current tax credits to pay back 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. See How do I know if I have been overpaid? to find out where to look for this information.

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’. See I don’t think I should pay the money back. What can I do? for details of how to do this. If you do this, HMRC will stop asking for the money until they have investigated and replied to you. There are no time limits for disputes.
2. If you think HMRC are wrong about the amount of tax credits they have given you, you can appeal the decision. An appeal is when you ask HMRC to look again because you think they are wrong about the amount of your tax credits, and that you weren't overpaid or that your overpayment is smaller. See How to Appeal. 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 Can I appeal or should I do something else?. You can send an appeal and a dispute at the same time.
3. Ask HMRC to take less money from your tax credits if the lower payments are causing you difficulty. See Paying the overpayment for more information on what to do if you cannot manage with lower payments.
4. Do nothing. HMRC will continue reducing your tax credit payments until it is all paid back.
5. Seek advice to help you decide what to do. See How to make a complaint.

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

This normally happens because your tax credit claim has ended for some reason. This might be because you have moved in with a new partner or you are no longer working. HMRC can only take money from your tax credits to pay back an overpayment that happened on the same claim. Once the claim ends, they have to ask for the money from you directly. Even if you have made a new claim, HMRC will still write to you asking for the money from the old claim.

Court Action

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 must contact HMRC straight away. You should 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 for your payment options.

This will give you time to look at the rest of this guide and decide if you are going to ask HMRC not to take back the money. You might also want to appeal if you think they have awarded you the wrong amount of tax credits.

If it is too late, and the case has already gone to court, you should seek advice as soon as possible. See How to find an adviser.

February 2010