Tax credit overpayments. Debt advice

How are tax credits calculated?

At the end of the tax year, Her Majesty's Revenue & Customs (HMRC) look at the income you actually received during the year. If this was more than they expected, you may have been paid too much in tax credits. You’ll need to repay this, as the consequences of not paying can be very serious, as with all income tax arrears.Find out more about why some debts should be dealt with first.

If your income goes up or down, it’s important to let HMRC know straight away so they can adjust your tax credit payment. This will help to prevent an overpayment at the start of the next tax year when your award is reassessed. You can notify HMRC of any changes on 0345 300 3900.

Need help with tax credit debts?

What if I don’t agree with the tax credit overpayment?

If you don’t agree with the overpayment you can ask HMRC to review it. To do this you need to contact HMRC on 0345 300 3900 or complete and return a tax credit overpayments form TC846.

You normally have three months to do this. HMRC can also continue to reclaim tax credit overpayments while they review your dispute.

How long do I have to pay a tax credit debt?

If you’ve been asked to pay back a tax credit overpayment and you can’t afford to do this within 30 days, you should let DWP Debt Management know when they contact you, or call HMRC on 0345 302 1429.

If you’ve been asked to pay HMRC directly, the time they’ll usually allow you to pay back the overpayment is either:

• 12 months – they’ll usually allow you to pay in twelve monthly instalments without giving them any further information.
• Up to 10 years – they’ll usually agree to this without asking for any further information, as long as you can pay more than £10 a month. If the amount you can afford is less than £10 per month, they may still agree to this if you can afford to pay the debt off in less than three years
• Over 10 years – you’ll need to provide a budget and pay more than £10 a month. If it’ll take you a very long time to repay the debt, HMRC may consider writing off the debt after 10 years. We can help you put together a budget which shows your current financial situation

If you can’t afford £10 a month and it’ll take longer than three years to pay off the debt, HMRC may agree to put the debt on hold for 12 months. If your situation is the same a year later and you still can’t afford £10 a month, they may agree to write off the debt.

Worried about money?

We’ll put together a tailored budget based on your income and living costs, and we’ll work out what you can realistically afford to pay to HMRC and any other debt you have. We’ll also look at the right debt solution for your situation and support you all the way.

Take two minutes to answer a few simple questions, so we can understand the best way to help you. Alternatively you can call us (free from all landlines and mobiles) for expert, impartial advice tailored to your situation.