Repaying benefit debts and overpayments

If you think you’ve been overpaid benefits or tax credits, it’s important to report it as soon as possible. The longer you leave it, the more money you’ll have to pay back.

Tax credits awards are estimates, which are finalised after you’ve renewed your claim each year.

The amount by which your income can change before you have to tell the Tax Credit Office is £2,500. This is called the income disregard.

Report an overpayment of Housing Benefit or Council Tax Reduction to your local authority.

Contact the office paying your benefit as soon as possible and let them know that you think you’ve been overpaid.

The overpayment might have happened because of:

• a mistake when your benefits or tax credits were worked out
• wrong information, or not enough information, when you made your claim
• a change of circumstances
• not renewing your tax credits on time.

Tax credits overpayments are common. If you’ve moved from tax credits to Universal Credit, you might have had a letter from HMRC telling you that you’ve been overpaid tax credits.

This overpayment will be deducted from your future Universal Credit payments.

Here are your options:

• Do nothing and wait for the repayments to be deducted from your Universal Credit payments.
• If you can’t afford the repayments, notify the DWP Debt Management contact centre at GOV.UK.
• Find out more about repaying the tax credits overpayment at GOV.UKOpens in a new window
• Dispute the overpayment if you think it’s wrong.

If the overpayment was your fault you will be asked to pay back an overpayment of Universal Credit, new style Jobseeker’s Allowance or new style Employment and Support Allowance.

If the overpayment wasn’t your fault, for example an administrative error, you’ll usually be asked to pay it back as well.

However, if you think the amount you received is correct you do have the right to argue that you haven’t been overpaid and challenge the decision. See our section on ‘How to challenge an overpayment decision’.

You shouldn’t have to pay back an overpayment if the Tax Credit Office made the mistake and you did everything you could to make sure your award was correct. In other words:

•  you reported all changes of circumstances on time
• you checked your award notices and reported any errors within one month.

Find out more about tax credits overpayments at Citizens AdviceOpens in a new window

You won’t have to pay back a Housing Benefit overpayment if it wasn’t your fault, and you couldn’t have been expected to know that you were being overpaid.

Find out more about paying back a Housing Benefit overpaymentOpens in a new window on the Citizens Advice website.

Overpayments of Council Tax Reduction are treated as Council Tax Arrears. The rules for how they need to be repaid vary depending on where you live.

Find out more about Council Tax Reduction overpaymentsOpens in a new window at Turn2us.

For all other benefits, you’ll have to pay back the overpayment if you gave the wrong, or incomplete, information when you made your claim.

You have the right to argue that you haven’t been overpaid and challenge the decision. See our section on ‘How to challenge an overpayment decision’.

You’ll get a letter – or a message in your online account – about your overpayment. This will explain how much you were overpaid and for how long.

If you're repaying the amount you owe by taking the money out of current benefits, the way your repayments are worked out is different depending on which benefit has been overpaid:

• For Universal Credit, it can’t be more than 25% of your standard allowance.
• For tax credits, it varies from 10% to 100% of your award. This depends on how much you currently get in tax credits and your household income.
• For Housing Benefit – if it’s paid to you, the repayments are usually £13.65 a week (2024/25). If it’s paid direct to your landlord, they usually have to pay it all back in one go and you’ll have to agree a repayment plan with your landlord.
• For other benefits, such as Income Support or Pension Credit, the repayments are usually £13.65 a week (2024/25).

If the overpayment is your fault, or you didn’t try to correct a mistake, you might be charged a penalty of £50 on top of the money you have to pay back. This only applies to benefits, not tax credits.

You can appeal against a decision to charge you a penalty. 

You can ask for the decision to be looked at again and appeal against it, if:

• you don’t agree that you’ve been overpaid
• you don’t agree with the amount
• you don’t think you should have been charged a penalty.

Find out how to challenge a benefits decisionOpens in a new window on the Citizens Advice website.

You might have received an advance payment while you were waiting for your first Universal Credit payment to come through.

Your repayments will probably have started straight away, although they can be delayed up to three months if you’re in financial crisis.

You can make the repayments over a maximum of 24 months. And they can be up to 25% of your Universal Credit basic allowance.

You might have had a Budgeting Advance to help with emergency household costs or to pay towards a funeral.

Your repayments will have started straight away after receiving the advance. They are taken out of your Universal Credit payments.

They are usually spread over 12 months, but this can be extended by an extra three months if needed.

You might have received a Budgeting Loan to help pay for a household appliance or to help with the cost of moving home.

Repayments for Budgeting Loans were paused during the coronavirus crisis, but are now restarting. They’re usually spread over two years and are taken automatically from your benefits. The repayment amount is based on your income and what you can afford.

You might have had a Hardship Payment to help make ends meet if your benefit payments were reduced because of a sanction.

You only have to repay a Hardship Payment if you’re on Universal Credit (not other benefits). They’re repaid out of your future payments and they can be up to 30% of your Universal Credit basic allowance.

Before repaying a benefit debt, speak to a free debt adviser to make sure you can afford the repayments. Use our Debt adviser locator tool to find free and confidential debt advice online, over the phone or near to where you live.

Benefit debt repayments can be made by:

• deductions from your benefit payments
• making payments through online banking, Direct Debit or standing order.

If none of these are possible, the debt can be recovered from your wages or passed onto a debt collection agency.

If you’re struggling, or worried you might, speak to a free debt adviser.  

A debt adviser can give free and confidential debt advice online, over the phone or near to where you live. They will:  

• treat everything you say in confidence 
• never judge you or make you feel bad about your situation  
• suggest ways of dealing with debts that you might not know about 
• check you’ve applied for all the benefits and entitlements available to you.

If you don’t have enough to live on because of the repayments you’re being asked to make, you can ask for them to be reduced.

If you’re repaying a Universal Credit advance payment, call the Universal Credit Helpline or log into your online account and add a note to your journal asking for your repayments to be reduced.

Debts such as rent arrears, overdue energy bills, overpaid tax credits and unpaid Council Tax are called priority debts. This means the consequences of not paying them off are more serious.

If you’ve got more than one priority debt, it’s important to get advice as soon as possible.

Our bill prioritiser also helps to sort out which ones you need to deal with first.