Most overpayments of benefits can be taken directly from your current benefit claims. If you have an overpayment debt with no arrangement in place, it is likely that this will start when you make any new claims.

UC Deduction rates

Overpayments are repaid at a rate of up to 15% of the standard allowance. If one or both of the claimants’ (if they are a couple) earnings are above the level of the work allowance (if the work allowance is applicable ) an additional amount of up to 10% more can be deducted. 

The monthly work allowances are set at:

• If your Universal Credit includes housing support - £292

• If you do not receive housing support - £512

Your deductions could be lower than the caps below.

From 6 April 2020 the maximum monthly deduction is usually:

Single claim - aged under 25 - £102.82

Single claim - aged 25 or over - £122.97

Joint claim - both aged under 25 - £146.58

Joint claim - either of you aged 25 or over - £178.21

Exceptions

There are 2 exceptions - Last Resort Deductions (arrears of housing and fuel) and ongoing monthly costs for utilities (gas, electricity and water) where there are also arrears being taken for them.

Fraud deduction rates

If a claimant has intentionally provided DWP with incorrect information (fraud) overpayments are repaid by deducting up to 30% of the Universal Credit standard allowance.

Other Benefits

There is a maximum rate of deduction from:

• Income Support

• Income-based Jobseeker’s Allowance (JSA)

• Income-related Employment and Support Allowance (ESA)

• Pension Credit.

The maximum deduction from these benefits is £11.25 a week or £29.60 a week where the overpayment was due to fraud or you have agreed to a civil penalty.

An attachment of earnings order can be applied for to recover overpayments of benefits. It instructs your employer to take money directly from your wages to pay back a debt. 

Your employer sends the money to the court that made the order, and they then forward the money to the government department you owe the money to.

The DWP and HMRC can order in the County Court which lets them use county court enforcement, such as using bailiffs to try and take your goods or a charging order to secure the debt against property you own. 

This could put your property at risk. A charging order cannot be made against a property that you rent.

Housing benefit overpayments have some additional recovery actions:

• Your rent account might be adjusted if you rent from the council, this will result in a rent arrears position.

• If your housing benefit is paid directly to your landlord, they will be asked to return the overpaid amount, this will result in a rent arrears position.

• Court action within 6 years of the decision letter

Deduction rates

The maximum deduction is:

• £18.50 where the overpayment resulted from fraud

• £11.10 in any other case.

The total deduction can then be increased by up to 50% of:

• any £5, £10, £20 or £25 earned income disregard

• the amount of the employment and support allowance permitted work earning where the weekly limit is £20

• any disregard of regular charitable or voluntary payments (such as payments from family, friends or charities)

• the £10 disregard of war disablement or bereavement pension.

It is usually possible for a claimant with weekly deductions that cause financial hardship, to negotiate a lower rate of deductions.

If you still get tax credits

HMRC will automatically reduce your future tax credit payments until you have paid back the money you owe.

The amount they will reduce your tax credit payments by usually depends on how much you currently get and your household income.

Rates

• £20,000 or less and you get maximum tax credits - 10%

• £20,000 or less and you get less than the maximum tax credits - 25%

• More than £20,000 - 50%

If you only get the family element of Child Tax Credit, your payments will be reduced by 100% whatever your income is.

If you now claim Universal Credit

If you claimed tax credits as a couple the debt will be split in half between you. Each of you will receive a letter with details of your half of the debt. You must each pay your half.

An overpayment could have happened because, for example, the person who died:

• had more savings than they declared in their benefit claim

• had not declared an income

• was in hospital or a nursing home and had not told DWP

The Department for Work and Pensions (DWP) can recover benefit overpayments from a person’s estate.

If you are dealing with the estate, DWP will write to you once probate has been granted to ask for the information they need.

The estate should not be distributed until you know what needs to be repaid. If you do, you may have to pay back the money yourself.

If you deliberately do not report a change of circumstances, your overpaid benefit might be considered as benefit fraud. If a benefit overpayment is subject to fraud, it cannot be written off in a formal debt solution, it has to be repaid.

It is important that you tell your debt adviser whether debts have occurred through fraud as repayments will need to be negotiated as a priority before you proceed with a debt solution.

If you have been interviewed under caution, this might mean you are going to be prosecuted, but this will depend on the interview outcome, you will be notified of the decision in writing.

Deductions from Universal Credit 

If the deductions from your UC claim are causing exceptional hardship, you can request that they be lowered.

You can request lower overpayment deductions by contacting the debt management unit, make sure that you have your latest budget to hand before calling: 0800 916 0647.

Tax Credit Overpayments

If the above recovery rates are too high and causing you hardship, you can ask for them to be lowered on grounds of exceptional hardship, you can do this through your government gateway account (quickest), or call the Tax Credit helpline: 0345 300 3900.