This guide explains what a tax credit overpayment is and ways to deal with an overpayment.

Use this guide to:

• understand why you may have a tax credit overpayment;
• know how you may be able to appeal an incorrect benefit overpayment decision;
• find out what options you have to deal with a tax credit overpayment; and
• understand how the overpayment may be recovered.

What is a tax credit overpayment?

A tax credit overpayment is money owed because you have been paid more tax credits than you should have. Tax credit overpayments are owed to and collected by HM Revenues & Customs (HMRC).

Tax credits ended on 5th April 2025. This means tax credit overpayments can no longer be deducted from an ongoing tax credit payment.

If eligible, its likely you have already moved from receiving tax credits to Universal Credit (or Pension Credit if you are state pension age). You should have had a migration notice giving you a deadline to make a Universal Credit claim. If you aren’t getting Universal Credit but think you should, you can use a benefits calculator to check if you are eligible.

Overpayments may occur for lots of reasons. For example, because:

• the tax credit office made a mistake;
• the information you gave the tax credits office was incorrect; or
• you didn’t tell the tax credit office about a change in circumstances which would have meant your benefit would reduce or stop.

All tax credit overpayments are recoverable. The reason for the overpayment doesn’t matter. HMRC can decide whether to recover the overpayment or not.

In the past tax credits used a ‘renewal’ process. This meant waiting until the end of the tax year (April) to make a new claim. HMRC would then check whether you had been paid the right amount of tax credits for the last tax year.

As part of the change from tax credits to Universal Credit, HMRC moved to an ‘in-year finalisation’ process to check if you’ve been given the right amount of tax credits. This means you don’t have to wait until the end of the tax year to be told if HMRC think you have been overpaid.

HMRC will write to tell you if they think you have been overpaid tax credits. If you are unsure if the overpayment is correct and need to know more, you can ask for an award calculation notice (TC647) from HMRC. The notice gives more detail about how your award was worked out. To ask for the notice call the helpline on 0345 300 3900.

If you agree you were overpaid tax credits, go to the Recovery section of this guide to find out what happens next.

If you do not agree that you were overpaid, you can request a ‘mandatory reconsideration.’ Use Form WTC/AP to do this. For more information see the Mandatory reconsideration section that follows.

If you agree that you did get more tax credits than you were should have, but do not think you should pay it back because you believe it was a mistake by HMRC, you can dispute the overpayment. Use Form TC846 to do this. For more information, see the Dispute due to HMRC mistake section.

Mandatory reconsideration

You can’t appeal a decision to recover an overpayment. However, you can ask for a mandatory reconsideration to appeal against:

• a decision that you have been overpaid, or
• the amount of the overpayment.

You must ask for this within 30 days of the date on your revised award notice. Your request should be made in writing. You can use the Form WTC/AP.

Late mandatory reconsideration requests

If you are outside the 30 days, you can still ask for a mandatory reconsideration within 13 months of your revised notice award. But, you will need show HMRC that there were special circumstances which meant that you could not meet the 30-day time limit. (For example, because you had a serious illness).

If your application is refused, HMRC say that you have no right to appeal this or the original decision. A decision in a recent court case has said that this is not correct. You can appeal against the original decision, even if HMRC refuses to accept your late application, if you applied within 13 months .

HMRC aim to carry out the mandatory reconsideration within 42 days . HMRC may ask for more information from you. It is important to reply as you may be given a penalty if you do not.

After making a mandatory reconsideration request, you should receive a mandatory reconsideration notice. This will tell you the outcome. If you think the decision is wrong, you can appeal to the First-tier Tribunal.

First-Tier Tribunal

If you are not happy with the outcome of the mandatory reconsideration, you can appeal to the First-Tier Tribunal on the Form SSCS5.

You must be able to prove to the First-tier Tribunal that HMRC have looked at your mandatory reconsideration application. Send a copy of the mandatory reconsideration notice to the tribunal when you appeal.

Send any documents that support your appeal that have not already been given to HMRC. You should also explain why you think the HMRC decision is wrong.

• You can ask to attend the hearing when you apply if you wish. The hearing can be in person or remotely (telephone or video link).
• The tribunal must deal with the case fairly and justly.
• The tribunal can ask you or HMRC for more information to help them make a decision. It is important to respond to any request or your appeal could be struck out (dismissed by the tribunal).
• You can have a representative who can help present your case to the tribunal. You need to give the tribunal written notice of this at least 14 days before the hearing.

It is usually best to attend the hearing so you can explain your situation.

Time limits for appealing

You should make the appeal within one month from the date you have been sent the mandatory reconsideration notice. If you appeal after this time but within 13 months of being sent the notice, your appeal may still be treated as being in time as long as HMRC do not object. If HMRC do object, the First-tier Tribunal can accept the appeal if it would be unjust not.

The tribunal will send you a decision notice. This will give the tribunal’s decision and the reasons for it. If you are successful, HMRC should carry out the tribunal’s instructions straight away, unless they decide to appeal.

If you are unsuccessful in your appeal, you may be able to set aside the decision on procedural grounds. But this is only allowed if it is in the interest of justice to do so. You may also be able appeal to the Upper Tribunal. You’d need to be able to show that there has been an error of law to do this. Get specialist advice from a benefit adviser before taking either option.

More information on the first-tier tribunal process can be found on the GOV.UK website.

Dispute due to HMRC mistake

If you agree that you received more tax credits than you were should have, but do not think you should pay it back because you think it was a mistake by HMRC, you can dispute the decision to collect the overpayment.

• Use Form TC846 to do this.
• The HMRC leaflet What happens if we’ve paid you too much tax credit? (COP26) has more information or call the Tax Credits Helpline on 0345 300 3900 .
• HMRC expect the dispute to be started within three months of the decision (notification of the overpayment, outcome of the mandatory reconsideration or appeal decision).
• While there is no legal time limit by when the application has to be made, you will need to convince HMRC that there were good reasons for a late dispute. For example, you had a serious illness.
• Recovery will continue during the decision-making process.

Complaint

If you are unhappy about the service you have received from HMRC, you can make a formal complaint using HMRC’s complaints procedure.

If you are unhappy with HMRC’s response to your complaint, you can escalate the complaint to the Adjudicator’s Office. You can call them on 0300 057 1111 .

Finally, you can escalate the complaint to the Parliamentary and Health Service Ombudsman through your MP. You can call the Parliamentary and Health Service Ombudsman on 0345 015 4033 .

Recovery

Collection by DWP

If you have moved to Universal Credit, HMRC are likely to move the debt to the Department of Work and Pensions (DWP) to recover. If this happens, the debt can be recovered as though it is a Universal Credit overpayment. For more information, see the Recovery section of our Benefit overpayments under the Universal Credit system guide.

Collection by HMRC

If the debt is not passed to the DWP, you can be asked to make direct payments to HMRC. You should be sent a a TC610 form and given 42 days to pay the amount owed or try to agree a payment plan. If you can clear the amount owed in less than 12 months, it is likely that HMRC will agree to this. Payment plans can be agreed over a longer period if your budget shows you are unable to repay it quicker.

HMRC may pass the debt to a debt collection agency (DCA) if a payment plan isn’t agreed. DCA’s are not bailiffs and have no powers to enter your property or remove items.

If the DCA is unable to make an arrangement with you to repay the debt, they will pass it back to HMRC who can look at using other methods of collection.

• Bailiffs can be used to try and remove items from your property. If this happens, please call us for advice.Bailiffs do not have the power to force entry to your property so you should not let them in. Unlike most other creditors, HMRC do not need to get a court order to use Bailiffs.
• With your consent, HMRC can recover overpayments from some benefits. Consent is not needed if the debt has been passed to the DWP.
• With your consent, HMRC may recover overpayments from your wages. Consent is not needed if the debt has been passed to the DWP.
• In some circumstances, such as when the debt is at least £1000, HMRC have the power to take money from your bank account. They do not need a court order to do this. Money can be taken from individual, joint and business accounts.
• HMRC can also look to get a decree against you. This is rare as they can take other action without having to get a decree first.
• While HMRC do have the power to send someone to prison, this does not happen in practice.

Joint claim

If your overpayment is in joint names, HMRC guidance says that they can pursue one person for the whole amount owed. But in practice, they should look to recover the money equally from each claimant. If one of the persons liable has acted fraudulently, HMRC are more likely to recover the whole debt from that person.

Write off

In cases of hardship, or if you have mental health issues, you can ask that the overpayment is written off. This means the debt will not need to be repaid. You will need to show HMRC your budget so they can see that you will be unable to meet your essential living costs. You should provide evidence of any physical or mental health problems.

HMRC should deal with your case positively and sympathetically to avoid causing distress.

Even if HMRC do not agree to write of the debt, they can decide to stop recovery for 12 months if you have no ability to pay. They will review their recovery options (including write off) again at the ends of the 12-month period.

To request a write off contact the Tax Credit Payment Helpline on 0345 302 1429 or write to the address on their overpayment notice.

Civil Penalties and fraud

Civil penalties

You can be given a financial penalty if you have fraudulently or negligently made an incorrect statement or declaration. Financial penalties are not a criminal mattter. Payment must be made within 30 days and interest can be added. You can also get a penalty for not giving HMRC information they have asked for.

If you do not come to an agreement to repay the penalty, HMRC recover the debts in the same way as an overpayment.

Fraud

You may have committed a criminal offence (fraud) if you knowingly took part in fraudulent activity to get tax credits. If you have been suspected of fraud, you should seek legal advice from a solicitor.

If you are convicted of fraud, you may get a court fine or face imprisonment. You may also lose your right to benefits for a period. The length of time will depend on the offence.

Time limit for recovery

If a debt is barred under statute, it means that by law (the Limitation Act), HMRC has run out of time to use certain types of action to try to make you pay the debt.

For tax credit overpayments, time starts to run from the date a final decision was made to recover the debt. Once the limitation period is running, the debt will normally be statute-barred if:

• HMRC has not already started a county court claim for the debt; and
• you or anyone else owing the money (if your debt is in joint names) do not make a payment towards the debt for at least six years; and
• you do not write to HMRC admitting you owe the debt during the last six years.

However, it will still be possible for HMRC to recover the overpayment from benefits or wages as court is not needed.

Useful contacts

GOV.UK for information on finding legal advice www.gov.uk/find-legal-advice

HMRC Tax Credit Payment Helpline Phone 0345 302 1429

Independent Case Examiner Phone 0800 414 8529 www.gov.uk/government/organisations/independent-case-examiner

The Parliamentary and Health Service Ombudsman Phone 0345 015 4033 www.ombudsman.org

Turn2us for information on finding a benefits adviser https://advicefinder.turn2us.org.uk/

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