Paying the overpayment

Do I have to pay the overpayment all at once?

No. The first letter that you receive might ask for all of the money back at once, but you do not have to pay it back at once. Have a look below to find out the different ways you can pay the money back.

Remember, if you have sent in a dispute or an appeal (or both) they should not ask you for the money back until they have sent you a reply. This is also true if you have sent in a dispute before.

If HMRC are asking you to pay it back straight away

The letter that told you about the overpayment normally asks for the money to be paid back in 30 days even though it is possible to repay it over a longer time. These letters are often difficult to understand at the best of times, let alone when you're worried and upset.

It is important that you take some action when you receive this letter. To repay it over a longer time, you must ring the number on the letter.

The options you have to repay are:

• The full amount in 30 days -most people can't afford this

• The full amount, spread out in monthly payments over 12 months - depending on your situation, and the amount of the overpayment you might want to do this

• Over a longer period which you can afford.

If you want to pay over more than 12 months, you need to work out what you can afford each month and ask HMRC if they will accept it. Phone the number on your overpayment letter. If it will take you less than ten years to pay it back, and the amount seems reasonable, they will usually just accept it without asking for full details about your income and outgoings.

If you want to make payments that will take longer than 10 years, HMRC will ask you for details of all money you have coming in and what you need to spend it on. They will then work out how much they will accept.

If you are already paying back an overpayment from your tax credits, they should not write to you asking you to pay another overpayment back directly until you have finished paying back the first.

Remember, you should not feel like you have to pay back more than you can afford. You can get help from an adviser (See How to find an adviser). They could speak to HMRC for you about how much you can afford to repay each month.

If HMRC are taking the money back from your tax credits

If HMRC are taking money from your tax credits to pay back an overpayment, then the law says that they can only take certain amounts depending on your situation.

If you receive maximum tax credits (for example because you receive Income Support or Income Based Jobseeker’s Allowance) they can only reduce your payments by up to 10%.

If you receive less than the maximum tax credits, but more than the basic amount (which is £545, or £1090 if you have a baby under one) then the most they can reduce your payments by is 25%.

If you are receiving just the basic amount, they can stop your tax credits altogether until the overpayment is paid back.

If you also get housing or council tax benefit you should tell your council that your income has gone down. You may be entitled to more help with your rent or council tax.

December 2010