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i The advice on this page applies to anyone with personal debts taken out in the UK.

DWP Debt Management

Tax credit overpayments. Debt advice

If you’ve had tax credit overpayments these will have to be repaid. DWP Debt Management, part of the Department for Work and Pensions (DWP), will contact you and discuss repayment options, which can include deductions being made from your wages or benefits.

Why have I been contacted by DWP Debt Management?

DWP Debt Management is responsible for recovering overpaid benefits. As well as dealing with tax credit overpayments, they may contact you to recover other government debts, such as:

  • Social fund loans
  • Short-term benefit advances
  • Overpaid benefits from the estates of people who have died

If you’ve been contacted by DWP Debt Management about a tax credit overpayment and you’re worrying about not being able to make payments, we can help. Get in touch with us for free and impartial debt advice.

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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.

How can I pay a tax credit overpayment?

When you’re contacted by DWP Debt Management, they will explain that you need to repay the overpayments; how you repay depends on your circumstances.

  • If you currently don’t get tax credits or Universal Credit: You will be sent a ‘notice to pay’ which you should respond to within 30 days. If you fail to pay what’s owed, money could be taken from your wages
  • If you’re on Universal Credit: Your benefit payments will be reduced until you’ve repaid what you owe
  • If you’re still getting tax credits: Your tax credit payments will be reduced until you’ve repaid what you owe

Reductions in tax credit payments are based on your annual household income. If your income is less than £20,000 and you get minimum tax credits, they will be reduced by 10%. If your income is higher than £20,000, they can be reduced by a maximum of 50%.

wallet iconA direct earnings attachment (DEA) is used to take money from your wages or benefits to repay tax or Universal Credit overpayments. There’s no court order for a DEA.

What happens if you don’t pay back tax credit overpayments?

If you don’t pay back the money you owe, the HMRC and DWP can take further action to recover the money you owe. They may:

  • Pass the debt to a debt collection agency to contact you: Debt collectors are not bailiffs and don’t have any extra powers
  • Take you to court: If you don’t pay them, they can apply for a County Court judgment(CCJ) or decree
  • Send bailiffs (enforcement agents) to your home: HMRC don’t need a court order to send bailiffs or Sheriff officers, but they rarely use this power.

If you make an arrangement to repay the debt, it’s very unlikely they’ll use these powers.

If you can’t afford to make payments contact DWP Debt Management

DWP Debt Management contact centre

Telephone: 0800 916 0647, Textphone: 0800 916 0651. Calling from abroad: +44 (0)161 904 1233. Monday to Friday, 9am to 5pm

For more information on tax credits, visit Gov.UK.

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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.

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