What happens if I am overpaid tax credits?
Overpayments during the tax year
If the Tax Credit Office thinks that, because of a change, you are likely to be overpaid tax credits at the end of the tax year, it may reduce or stop your tax credits so that you are paid the right amount for the whole year. Since November 2006 your payments should only be reduced by the same amounts as for overpayments at the end of the tax year - see below. However, this will not happen automatically so you must contact the Tax Credit Office and ask for additional tax credits payments - see What if I am having difficulties repaying the overpayment? below.
Overpayments at the end of the tax year
At the end of the tax year, the Tax Credit Office checks the amount you were awarded against your actual income and circumstances to check if it is correct. If you are overpaid, the Tax Credit Office will want to recover this, usually by reducing your tax credits in the following year.
The maximum amounts that your award can be reduced by are:
- 10 per cent of your award if you are on a low enough income to receive the maximum amount of tax credits to which you could be entitled;
- 100 per cent of your award if you receive only the family element of Child Tax Credit; or
- 25 per cent of the award, in all other cases.
If the overpayment occurred when you were claiming with an ex-partner you are both liable to repay all of the debt. It is up to the Tax Credit Office how much they will try to recover from you. If they are unable to recover any of the overpayment from the other person, they may wish to recover all of it from you. These types of overpayments will be recovered directly from you, and not by reducing your future tax credits. If you have this type of overpayment, speak to a specialist benefits adviser.
Can I dispute the decision to recover an overpayment?
If the overpayment was due to 'official error', that is, if the Tax Credit Office made a mistake and you were not able to tell that you were being paid the incorrect amount from the information you received, make a request for them to consider not recovering the overpayment. You can make the request on form TC846, available from the Tax Credit Office or the Tax Credits Helpline on 0845 300 3900.
You can also make a request for all or part of an overpayment not to be recovered because it would cause your family hardship. When describing the hardship your family is experiencing, include any impact on your or your child's health or welfare, the effect on your caring responsibilities, any other debts you have and whether it would make it difficult for you to take up or stay in paid work.
What if I am having difficulties repaying the overpayment?
In some circumstances, the Tax Credit Office can decide to make additional, or 'top-up' payments to you if repaying the overpayment is causing your family hardship (see above). If you are having difficulties because your tax credit award has been reduced, phone the Tax Credits Helpline and ask about additional payments. These payments will still count as an overpayment at the end of the year but the Tax Credit Office can use its discretion to not recover these payments the following year if it would cause you hardship.
Remember, if your tax credit income goes down because you are repaying an overpayment, you may be entitled to new or increased amounts of other benefits, for example Housing Benefit.
Since November 2006, if you dispute the decision to recover an overpayment, the Tax Credit Office will automatically stop recovery of an overpayment while it considers your request.
Further information
Your local Citizens Advice office may have a specialist benefits adviser who can help: look for details of your local office on www.citizensadvice.org.uk
You can find out more about tax credits and request forms and leaflets through the Tax Credits Helpline on 0845 300 3900, or the website: www.hmrc.gov.uk/taxcredits
Find out from your local authority whether this is a Welfare Rights Service in your area – it may offer independent advice and representation.