Overpayment of Tax Credits
A common problem with Tax Credits is overpayments. This is where HMRC have paid you more Tax Credits than you should have had. If you have had your award changed or stopped because of an overpayment, a Tax Credits overpayment is being recovered from another benefit (for example, Universal Credit), or you have been asked to pay money back directly, it is a good idea to speak to a specialist benefits adviser who can check whether the overpayment has been calculated correctly and tell you about any options you may have. This is not something Working Families can help you with.
How do overpayments happen?
Overpayments are common in the Tax Credit system. These are just examples of circumstances which cause overpayments:
- Your Tax Credits are based on the previous tax year and your income for the current tax year turns out to be over £2,500 more than the previous tax year.
- Your Tax Credits are based on an estimate of current year income which turns out to be too low.
- You stop being entitled to an element of Tax Credits and your award is not adjusted quickly.
More information about how overpayments can happen is on the GOV.UK website. The Low Incomes Tax Reform Group also have lots more information about Tax Credits overpayments and how to deal with them.
What you can do to dispute an overpayment
If you are unhappy with an overpayment and feel that you should not have to pay it back, you can:
- Challenge the amount of the overpayment (because you think you were not overpaid, or the amount of the overpayment is wrong). You will need to ask for the decision to be looked at again by asking for a mandatory reconsideration. If you are still not happy, you can appeal.
- And/or dispute the recovery of the overpayment (because you think you did everything you could to keep your award correct, and the overpayment is HMRC’s fault). Use form TC846 to do this.
- And/or complain about HMRC’s delays or mistakes.
HMRC will not suspend recovery because you think you should not have to pay the money back, but should suspend recovery if you appeal because you think you have not been overpaid.
More information on HMRC’s policy on overpayments is here.
Working Families cannot help you dispute a Tax Credits overpayment.
Paying back an overpayment more slowly
If you are unable to challenge the overpayment or dispute recovery or this doesn’t work, then you may still be able to negotiate to pay the overpayment back more slowly. You may need to supply evidence of financial hardship to do this, so it may be useful to get money advice.
Further help
There is lots more information about challenging Tax Credits decisions, disputing recovery and complaining on the GOV.UK site, but it is a good idea to get advice from, for example, Citizens Advice, about how to deal with the problem. Advice Now also have a useful factsheet on overpayments which will help you understand your options.
Working Families cannot help you dispute a Tax Credits overpayment.
This advice applies in England, Wales and Scotland. If you live in another part of the UK, the law may differ. Please call our helpline for more details. If you are in Northern Ireland you can visit the Labour Relations Agency or call their helpline Workplace Information Service on 03300 555 300.
If you have further questions and would like to contact our advice team please use our advice contact form below or call us.
Would your employer benefit from support from Working Families?
Would your employer benefit from some support & guidance from Working Families? If you would like to make your employer aware of how Working Families can help them, we have an introduction letter template available that you can give to the relevant person in your organisation.
The information on the law contained on this site is provided free of charge and does not, and is not intended to, amount to legal advice to any person on a specific case or matter. If you are not a solicitor, you are advised to obtain specific legal advice about your case or matter and not to rely solely on this information. Law and guidance is changing regularly in this area.
We cannot provide advice on employment rights in Northern Ireland as the law is different. You can visit the Labour Relations Agency or call their helpline Workplace Information Service on 03300 555 300.