What is a tax credit overpayment?
A tax credit overpayment is when you were paid more tax credits than you were entitled to. Tax credit overpayments are owed to and collected by HM Revenues & Custom (HMRC).
Why do they happen?
- The tax credit office made a mistake.
- The information you gave the tax credits office was wrong.
- You didn’t tell the tax credit office of changes which meant your benefit should have reduced or stopped.
HMRC can recover all tax credit overpayments. However, if you agree that you did receive more tax credits than you were entitled to, but do not think you should pay it back because you believe it was a mistake by HMRC, you can dispute the overpayment. See the Dispute due to HMRC mistake section on our tax credit overpayment guide.
What happens if I’ve been overpaid?
HMRC will write to you to say you have been overpaid. This is called a revised award notice. If you are unsure if the award is right, you can ask for an award calculation notice (TC647) from HMRC. This gives more detail about how the award was calculated.
Mandatory reconsideration
You can appeal against a decision that you have been overpaid, or the amount of the overpayment, by asking for a mandatory reconsideration. You must do this within 30 days of the date on the revised award notice.
HMRC aim to carry out the mandatory reconsideration within 42 days. They will tell you the outcome. If you think the decision is wrong, you can appeal.
Dispute due to HMRC mistake
You can dispute that you should repay an overpayment if you think HMRC made a mistake. You can do this even if you agree you have been overpaid. There is no legal time limit to start the dispute, but HMRC expect it to begin within three months.
How do HMRC get the money back?
- You may be asked to repay an ‘in-year’ overpayment or an ‘end of year’ overpayment.
- An in-year overpayment is for a claim which you are currently being paid.
- An end of year overpayment is for a claim for a period that has already ended.
For an in-year overpayment, HMRC will probably reduce your ongoing award until the overpayment is paid back. There are limits to how much they can recover, depending on the amount and type of tax credit, and your income.
HMRC can transfer the debt to the Department of Work and Pensions (DWP). If this happens, DWP can recover the debt as though it is a universal credit overpayment.
HMRC may ask you to make direct payments.
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.
In some circumstances HMRC can recover overpayments from:
- some benefits
- your wages
- your bank account.
