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Overpayments: benefits and tax credits

Key information

This section contains information about:

  • Overpayments of social security benefits and tax credits
  • Why they occur
  • The rules about when overpayments have to be repaid

Applies to: England, Wales, Scotland and Northern Ireland

Please note: We strongly recommend that anyone has been told they have been overpaid on benefits or tax credits and people facing an allegation of fraud should seek advice from a benefits or legal adviser. See Getting advice for more information.

See also Fraud investigations: benefits and tax credits

 

Index

You can read through this information sheet or go directly to the sections you want to read by clicking on these links:

Overpayment of benefits

This section answers the following questions about overpayment of benefits:

What is an overpayment of benefit?

An overpayment of benefits occurs if you are paid:

  • A benefit you are not entitled to, or
  • More benefit than you are entitled to.

Some of the reasons why this may happen include:

  • You give incorrect information when you claim benefit
  • You do not report a change in your circumstances
  • The benefit office makes an administrative error
  • Information that you give the benefit office is not taken into account correctly.

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How would I know if I had been overpaid?

You might realise that you have been overpaid because:

  • The amount you have received is incorrect
  • You have given incorrect information
  • That you have not reported a change.

You may also receive a letter from the benefits office telling you that you have been overpaid.

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What should I do if I think I am being overpaid?

If you think you are being overpaid or your award of benefit is incorrect, you should notify the office paying the benefit in question of any error or omission promptly. This may be:

If you are unsure whether the amount you receive is correct, seek advice from a benefits adviser. See Getting advice

Don’t delay. The longer an incorrect award goes on, the bigger any total overpayment will be.

If the benefits office decides that your award of benefit is incorrect, they will:

  • Recalculate your correct entitlement and revise your award
  • Calculate how much benefit has been overpaid, and will also decide whether the overpayment should be recoverable. They will also decide if a civil penalty should be applied
  • Notify you of your recalculated award and that you have been overpaid. Please note that you may receive one letter telling you this or separate letters about your new award and the overpayment.

The calculation of your correct benefit, the amount overpaid, and the decisions whether it is recoverable and whether a civil penalty should be applied, will be carried out by your usual benefit delivery centre/benefit office. You have the right to appeal against one or all of these decisions if you think they may be wrong.

The Department for Work and Pensions has a number of special offices called debt recovery centres (link opens in a new window), which are responsible for collecting repayments of amounts overpaid.

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Will I have to repay the overpayment?

Many, but not all, benefit overpayments are recoverable.

Additional rules apply to overpayments of Housing Benefit and Council Tax Benefit. See Recovery of Housing Benefit and Council Tax Benefit for more information.

A benefit overpayment is recoverable from you if it is caused by your:

  • Misrepresentation, or
  • Failure to disclose.

These terms are defined below.

Misrepresentation

Misrepresentation means that you have given information that is not correct or is incomplete.

It may happen when you:

  • Make a claim for benefit by telephone or on a claim form
  • Fill in a form or write a letter or sign a document
  • Speak to someone at a benefit office.

The benefits office might decide that it was misrepresentation if you gave wrong information on a claim form and the award has always been incorrect.

To avoid misrepresentation, make sure that you:

  • Answer questions that the benefit office asks you correctly, checking your facts first if unsure
  • Do not ignore questions
  • Check that information is correct before you sign any form
  • Check the decision letter you receive when benefit is awarded.
Failure to disclose

A failure to disclose might apply to an award of benefit that has become incorrect because you either failed to:

  • give accurate and complete information that you were asked to give, or
  • report a change of circumstances that you could have reasonably been expected to know might affect your benefit.

Failure to disclose may happen where you:

  • Make a claim for benefit or complete a form
  • Speak to someone at a benefit office
  • Do not report a change which you could reasonably be expected to know affects your benefit.

To avoid failure to disclose, make sure you:

  • Answer all questions the benefits office ask you accurately and completely
  • Read all letters from the benefit office
  • Read leaflets sent to you about your benefits
  • Note the changes that you must report
  • Report any changes which you think may affect your benefit.
What if I did not misrepresent or fail to disclose?

If the benefits office decides that the overpayment was not caused by your misrepresentation or failure to disclose, the overpayment will not be recoverable and you cannot be made to repay it.

No civil penalty can be imposed if the overpayment is not recoverable.

However, even if an overpayment is not recoverable the benefits office may ask in their letter whether you want to pay it back anyway. If this happens, seek advice from a benefits adviser. You can use our Find an Adviser tool to find a local one.

Please note: Your duty to report changes of circumstances is set out in the letters awarding benefit to you. If for some reason you were not notified of your obligations, an overpayment may not be recoverable.

For example, if you are visually impaired and asked the Department for Work and Pensions to provide letters and leaflets about your benefits in large print but you only ever received letters in ordinary text, you may be able to argue you were not properly notified of your obligations to report specific changes of circumstances.

Please note: As part of the Welfare Reform Act 2012 changes,  all overpayments of Jobseeker's Allowance, Employment and Support Allowance and housing costs paid with Pension Credit and Universal Credit will in the future be recoverable, whatever the cause of the overpayment. However, the Government has not yet set a date for this rule to come into effect.

Will I always have to repay if I misrepresented or failed to disclose?

Even if an overpayment is recoverable, the benefits office can decide not to seek recovery or may accept partial recovery.

You can ask the debt recovery centre not to recover or to accept a lower rate of repayment. They are unlikely to agree unless you can show that you did not know that you were being overpaid and that it is very difficult for you to repay. You should contact the office shown on the letter you have received about the overpayment recovery to discuss this. We also recommend that you seek advice from a benefits adviser. See Getting advice

See also the Gov.UK information on benefit overpayments (link opens in a new window)

Can I be made to repay my partner’s overpayment?

Probably not. Overpaid benefits can only be recovered from the person whose misrepresentation or failure to disclose caused the overpayment and cannot usually be recovered from anyone other than the claimant.

If you or your partner are overpaid the following benefits and you were a couple at the time of the overpayment, it may be recovered from either partner's ongoing benefit as long as you remain a couple:

Seek advice from a benefits adviser if you are asked to repay your former partner’s overpaid benefit. See Getting advice

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How is an overpayment recovered?

A recoverable overpayment may be recovered by:

  • Deduction from your on-going benefit  
  • From arrears of another benefit due to you
  • Direct recovery
  • Recovery through the courts.

If you are receiving benefits, any overpayment will usually be recovered by a direct deduction from these. Overpayments can be recovered from most benefits you may be getting.

There is a maximum rate of deduction from:

  • Income Support
  • income-based Jobseeker’s Allowance
  • income-related Employment and Support Allowance
  • Pension Credit.

For 2012/13, this is £10.65 a week, or £14.40 where the overpayment was due to fraud or you have agreed to a benefit penalty. See Fraud investigations: benefits and tax credits

There is no maximum rate of recovery from other benefits, but you can always try to negotiate a lower rate if the amount the Department of Work and Pensions ask for is too high.

If the benefits office is not able to recover from your on-going benefits, you will be asked to repay the amount in full, or to make an alternative repayment arrangement.

If you do not repay, you may face court action. This must usually begin within six years after the date of the recovery decision.

If you are threatened with court action, you should seek advice from a benefits adviser or debt adviser as a matter of urgency. See Getting advice

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What if I can’t afford to repay?

You would not normally be expected to make repayments if this would leave you without enough money to meet your basic living costs. You would usually need to provide a financial statement to show that you cannot afford to repay.

Even if the benefit office agrees not to recover for the time being, they may contact you again or start recovering from your benefit at a later date.

If you have been overpaid on benefits and can’t repay, you should seek advice from a benefits adviser as soon as possible. See Getting advice

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What should I do if I don't think I have been overpaid or that I should repay?

With all benefits, If you do not agree that you have been overpaid or do not think that this is recoverable from you, you can ask for this to be looked at again and appeal against the decision. See our information sheet on Challenging benefit decisions

The decision letter about the overpayment should include a breakdown of:

  • How much you were overpaid each week
  • For what period you were overpaid
  • The total that has been overpaid.

If you think the benefits office may have got the amounts or the dates wrong, you should contact them.

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How do I avoid an overpayment of benefit?

There are a number of ways you can help to avoid the risk of an overpayment:

  • Make sure that you provide accurate information and answer questions correctly when you make a claim; answer questions from the benefit office; or report a change in your circumstances
  • Read letters and leaflets carefully. For example, check that your details are correctly recorded on your benefit award notice. Read the letters and leaflets that come with your award notice carefully to ensure you know what changes to your circumstances you need to report to the benefits office.
  • Report changes in your circumstances as soon as you know about them. See Change in circumstances
  • Report any unexpected or duplicate payments of benefit you receive to the benefit office.

See also Getting advice and Further information

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How are overpayments of Housing Benefit and Council Tax Benefit recovered?

Most overpayments of Housing Benefit (HB England, Scotland, Wales) (HB Northern Ireland) or Council Tax Benefit are recoverable.

However, they are not recoverable if:

  • It was caused by ‘official error’ (this means an error by the local authority, the Department for Work and Pensions or HM Revenue and Customs), and
  • You did not contribute to the error, and
  • You could not reasonably have been expected to know that you were being overpaid.

Any overpayment of Council Tax Benefit credited to your Council Tax account for a future period is always recoverable.

Overpayments may be recovered from the person who received the overpayment or a person who caused the overpayment.

If the overpayment was paid to your landlord, seek advice from a benefits adviser if the local authority try to recover this from you as this may not be correct. See Getting advice

Civil Penalties

The local authority has the same power to impose a civil penalty as the DWP. If the local authority decides that an overpayment should be recoverable, they will also need to decide whether the overpayment resulted from your negligence in providing incorrect information, and whether you have a reasonable excuse for your failure to provide correct information. However, the local authority should not apply a penalty if your failure to provide correct information resulted in overpayments of more than one benefit and the DWP have already applied a civil penalty to the benefit they overpaid.

DWP guidance advises that  "Where the same error or failure affects different benefits, whilst those benefits identified may need a separate overpayment decision, for the purpose of the penalty it will be treated as one decision"

For example, if you have been overpaid Income Support which you were not entitled to and Housing Benefit was awarded incorrectly as a result of your entitlement to Income Support, only one civil penalty can be imposed.

See our information on Civil penalties

How are Housing Benefit/Council Tax Benefit overpayments recovered?

An overpayment of Housing Benefit (HB) or Council Tax Benefit (CTB) may be recovered by:

  • Deduction from your on-going benefit, which is the usual HB overpayment recovery method. If the overpayment was made while you were a member of a couple, the overpayment may be recovered from benefit paid to you or your partner so long as you remain a couple
  • Adjustment of your rent account if you are a local authority tenant (HB)
  • Adjustment of your Council Tax bill or your Council Tax account, which is the usual way of recovering a CTB overpayment (CTB)
  • Deduction from other benefits: if you are no longer receiving HB, the local authority may ask other benefits offices, such as the Department for Work and Pensions (DWP), to recover by deduction from other benefits, but only if the overpayment was due to your misrepresentation or failure to disclose
  • Direct recovery from you if the local authority is not able to recover  the overpayment from on-going benefits. In this case, the local authority would write to you asking you to repay or contact them to arrange repayment
  • Court action: this must normally begin within six years of the decision that the overpayment is recoverable. Seek advice if you are in this situation from a benefits adviser. See Getting advice
  • The local authority do not have to recover in every case and may agree to reduce or write off the overpayment in exceptional circumstances.
How do I challenge an HB/CTB overpayment decision?

If you do not agree that you have been overpaid, or do not think that this is recoverable from you, you can ask for this to be looked at again and appeal against the decision. See our information sheet on Challenging benefit decisions 

If the overpayment is recoverable from you, there is no right of appeal against the local authority’s discretion to recover, but you can make a complaint if their decision is not reasonable.

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Avoiding overpayments of Housing Benefit and Council Tax Benefit
  • Every time you move home, write to your local authority benefit section to let them know. If you move to a different local authority area, you will also need to make a new claim with the new authority
  • Report any changes to your household or who lives with you. See Change of circumstances
  • Let your local authority benefit department know if you stop receiving Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance or Pension Credit Guarantee Credit. You will need to give details of your new income and capital
  • Be careful to report increases in earnings, other income or capital.

 

Civil penalties for benefits overpayments

From 1 October 2012, the Department for Work and Pensions (DWP) and local councils have the power to impose a fixed rate civil penalty on some claimants who have been overpaid a social security benefit.

The penalty will be £50. It will be added to the total amount of the overpayment and will be recovered by the same method.

These rules on civil penalties only apply to benefits and not to tax credits.  

This section answers the following questions:

When can a civil penalty be applied?

For a civil penalty to apply the overpayment must:

  • have occurred wholly after 1 October 2012, and
  • be an amount of £65.01 or more, and
  • must be recoverable.

The overpayment of benefit must have been caused by a person:

  • making an incorrect statement, or
  • negligently giving incorrect information,

and

  • that person not taking ‘reasonable steps’ to correct the error.

A fixed penalty will not be applied if the DWP or local authority decides to take action under benefit fraud provisions. Possible actions under these rules can include:

  • prosecution
  • a formal caution
  • and/or a benefit penalty.

How many civil penalties can be imposed?

For each overpayment, only one civil penalty can be applied.

What circumstances may lead to a benefit decision maker considering a civil penalty?

DWP decision makers have issued guidance on how to decide when it may be appropriate to impose a civil penalty. This gives examples of the sorts of factors a DWP decision maker should consider when deciding whether to impose a civil penalty.

These include:

  • A decision maker should only apply a penalty when they are satisfied that a person has ‘negligently’ given incorrect information or failed to disclose information that they are aware of. The guidance defines 'acting negligently' as “acting carelessly, not paying sufficient attention to the task in hand, or disregarding the importance of what is required to be done ... “.
  • The person must have failed to take ‘reasonable steps’ to correct the error. The guidance advises that this means “sensible or practicable actions or interventions to correct the error”. What is considered to be reasonable will depend a great deal on the specific circumstances of each case. It will be important to make sure that the decision maker is aware of all the relevant factors which may have resulted in an incorrect statement being made. Also, that they know of any reasons why that person may not have been aware it was incorrect or been able to obtain any more up-to-date information.
  • A penalty should not be applied if the person has a ‘reasonable excuse’ for their failure to provide the correct information or for providing it late. The guidance gives the example of a person who has not been able to obtain up-to-date confirmation of the amount of their occupational pension from their pension provider.

Making a decision

The decision to impose a civil penalty will be made at the same as the overpayment decision. When the DWP realises you may have been overpaid benefit, they will look again at your award and make a decision with the corrected award of benefit for the period that the overpayment applies. At the same time they will decide whether the overpayment should be recoverable from you. Only if the overpayment is recoverable will they go on to consider whether a civil penalty should be applied. 

You will get a decision letter that states:

  • that you have been overpaid an amount of benefit and explains the period of the overpayment, the weekly amount of the incorrect payment and the total amount overpaid
  • whether the overpayment is considered recoverable from you,
  • if a civil penalty will be applied.

If you disagree with any [or all] of these aspects of the decision you can appeal. If you appeal against the decision to apply a civil penalty you will not to show that your actions were reasonable in your specific circumstances.    

Couples

Where benefit is paid jointly to a couple, a civil penalty can be imposed on either partner or on both partners jointly. However only one penalty can be imposed for each overpayment.

If one partner was unaware, and could not reasonably be expected to be aware, that their partner had made a negligently incorrect statement, then no penalty can be applied to that person, but a penalty may be applied to their partner.

Appointees and other people who help with claims

A civil penalty can be imposed on any person who has made a negligently incorrect statement in connection with a claim for benefit. If you have helped another person make a claim or if you are an appointee for them, it is possible that you may be responsible for the civil penalty, even if the actual overpayment of benefit is the responsibility of the benefit claimant

Further information

Overpayment of tax credits

This section answers the following questions about overpayment of tax credits:

Tax credit awards are calculated annually and your award for a year is only finalised after the end of that tax year.

An overpayment of tax credit will be calculated if you received:

  • more than your entitlement for that year, or
  • a payment to which you were not entitled.

Your tax credit entitlement may also be adjusted within a tax year to avoid an end-of-year overpayment.

The reasons why a tax credit overpayment may happen if:

  • you give incorrect or incomplete information when making or renewing a claim
  • you fail to notify a change of circumstance
  • you don’t report significant increases in income
  • you don’t renew your tax credits on time
  • HM Revenue and Customs (HMRC) make an error.

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How would I know if I have been overpaid?

You may know or suspect that you have been overpayment if:

  • you receive a letter or notice telling you that you have been overpaid
  • you realise that you gave incorrect information
  • you realise that you have not reported a change
  • your tax credits stop after you missed the renewal deadline.

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What should I do if I think that I am being overpaid?

All overpayments of tax credits are recoverable, so make sure you take steps to correct your award.

You should:

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Are all overpayments of tax credits recoverable?

Tax credits are assessed on an annual basis and your total entitlement for a year is not finalised until the end of that tax year. This means that an element of under- and over- payment is built into the system. It is expected that all overpayments will be carried over and recovered during the next tax year.

This means that all tax credits overpayments are recoverable.

However, HMRC code of practice guidance (COP26) (link opens in a new window PDF file size 145kb) states that an overpayment will not be recovered if it was due to a mistake at the tax credit office and not through any error of yours.

If both you and the Tax Credit Office made a mistake, they will decide whether to recover some or all of the overpayment.

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Who can the overpayment be recovered from?

Overpayments are recoverable from the claimant(s) who were overpaid.

This means that it is recoverable from you, if the overpayment was made on your claim as a single person, or from you and your partner or former partner, if the overpayment was made on your joint claim as a couple.

If you have separated from a partner, you should not normally be asked to repay more than 50% of the overpayment. You can agree with your former partner to pay different proportions of the overpayments each – example, one paying 30% and the other 70%. However, if this agreement is not kept, you may be asked to repay at least 50% of the remaining debt.

HMRC code of practice guidance (COP26) (link opens in a new window PDF file size 145kb) has more information about recovery of tax credit overpayments.

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How are tax credit overpayments recovered?

Tax credit overpayments may be recovered:

  • By deduction from your on-going tax credit award
  • Direct recovery from you
  • Court action.

If you are still receiving tax credits, the overpayment will be recovered from your on-going award.

If you are a member of a couple and the overpayment happened before you and your partner made a joint claim, the overpayment made to you cannot be recovered from your new joint claim. Your award may be reduced by 10%, 25% or 100% of the amount you would otherwise receive, depending on your circumstances. See HMRC code of practice guidance (COP26) (link opens in a new window PDF file size 145kb) for further information.

If recovery from your on-going tax credits is not possible, you will be asked to repay the full amount and given contact details to make a different arrangement. If the overpayment was on an award paid on your joint claim as a member of a couple, the overpayment may be recovered from you or your joint claimant.

If you do not repay, you may face court action. This must normally be started within six years of the overpayment decision.

If you are threatened with court action, you should seek advice from a benefits adviser as a matter of urgency. See Getting advice

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What if I can’t afford to repay?

For some people, having to pay back an overpayment of tax credit may cause financial problems.

You can ask HMRC not to recover some or all of the overpayment if recovery would cause you hardship or you have other special difficulties, such as mental illness, illness or disability.

You may be able to negotiate a suspension of recovery, reduction of the amount to be recovered or for the overpayment to be written off.

See HMRC code of practice guidance (COP26) (link opens in a new window PDF file size 145kb) and additional HMRC guidance Difficulty repaying overpaid tax credits? (link opens in a new window)

There is no right of appeal against a decision to recover a tax credit overpayment. However, you can make a complaint (link opens in a new window) if unable to reach agreement.

If you can't afford to replay an overpayment, we recommend that you get advice from a benefits adviser. See Getting advice

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What should I do if I don't think I have been overpaid or I should repay?

If you do not agree that your tax credits have been overpaid, you should appeal against the decision on how much your correct award should have been.

If you have been overpaid, you cannot appeal against the decision to recover the overpayment. However, you can make a complaint (link opens in a new window) if you unable to reach agreement on recovery.

See our information section on challenging benefit decisions and the information on the HMRC website about how to challenge a tax credit overpayment decision (link opens in a new window)

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How do I avoid a tax credit overpayment?

See also Getting advice and further information

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Getting advice

You should seek advice from a benefits or legal adviser if you have been told that you have an overpayment on benefits or tax credits and before responding to an allegation of fraud.

The following resources can help you locate one:

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Further information

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Frequently asked questions

1. I have been told that I might have been overpaid Housing Benefit. I did not receive the benefit as it was paid to my landlord. Will I have to repay the overpayment?

Usually, an overpayment would be recovered from the person who received the overpayment. However, it may be recoverable from you even though you did not receive the benefit. This would only be if you caused the overpayment by giving incorrect or incomplete information, or you failed to report a change in your circumstances.

If the overpayment is successfully recovered from your landlord, this will probably mean you will be in rent arrears.

You should seek advice if the local authority ask you to repay or recovers the overpayment from your Housing Benefit (HB England, Scotland, Wales) (HB Northern Ireland).

See Getting advice and further information

2. I am being prosecuted for benefit fraud. Do I still have to repay the overpayment?

Yes, but only if the overpayment is recoverable from you. If it is, it is still recoverable from you even after you have been prosecuted for fraud. See Fraud investigations: benefits and tax credits for more information.

If you have not already done so, seek advice from a benefits or legal adviser. See Getting advice and further information

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Last updated: 19 October 2012

Reviewed: 8 April 2013

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