Today, more than ever before, people’s money is expected to go a long way – food, energy bills, living expenses, and much more. If you suddenly get a letter asking you to pay back overpaid benefit payments, it can turn your world upside-down.
It can be very tricky to find accurate information about why benefit overpayments happen – and it’s even harder to find out whether they can be written off.
In this guide, we’ve explored benefits overpayments in easy-to-understand terms, you don’t have to try to read difficult government guidance. When you’ve finished reading, you’ll have a better idea about what steps you can take next.
What exactly are benefits overpayments?
‘Overpaid benefits’ is a term used to describe any amount of money that’s been received by someone who the government has decided isn’t entitled to that money.
Some of the official wording can make it sound like someone who’s received more benefits money than they’re entitled to is immediately at fault – but this usually isn’t the case.
Instead, it tends to be errors with the Department for Work and Pensions (DWP) that leads to the overpayment. In other cases, a mistake by the claimant means they’re accidentally getting more than they’re entitled to without realising it.
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Why does a benefits overpayment happen?
There’s no single reason why people end up with a benefit overpayment.
Sometimes it will be a error, such as if:
- HMRC, the DWP, or a local authority has made a mistake
- You’ve given incorrect information when you applied for the benefit payments
In other cases, it can be because your circumstances have changed and you are no longer entitled to the benefit – but haven’t let the relevant authority know. Very occasionally, benefit overpayments happen because a person has taken a benefits advance and then stop claiming the benefit straight afterwards – so the DWP will try to recover it directly, rather than collecting it from future benefit payments.
In some rare cases, a person might provide incorrect information knowing that it’s false so they can collect extra benefits payments. As you’re probably aware, this is referred to as ‘benefit fraud’.
Although there’s a lot of focus on ‘benefits fraudsters’ in the media, fraud is actually very rare.
Don’t panic if you get a notification saying you owe money to the DWP or another government department. This happens to millions of people every year and it’s extremely unlikely that anyone involved will assume you’re committing any kind of fraud – it’s far more likely to be an error at some stage in yours or the government’s processes.
What is a civil penalty?
If the DWP think you have been dishonest in an effort to claim more than you’re entitled to, they may talk about ‘civil penalties’ when they write to you.
A civil penalty is a fine that’s added to a debt as a punishment for committing benefit fraud. The amount can be anywhere between £350 and £5,000 – and it will be decided on when an investigation is done into what’s happened.
If you find yourself accused of fraud relating to benefits, you should seek professional legal advice around the next steps.
What happens if you realise you’re being overpaid?
While money is especially tight for people in the UK, the idea of getting an additional payment can feel like a bonus. However, if you realise you’re getting an overpayment before the DWP let you know, you should contact the benefit provider as soon as possible.
The longer any overpayment goes on, the more money they’re going to have to recover from you further down the line.
What should you do if the DWP writes you a letter to let you know you’re being overpaid benefits?
More often than not, people realise they’re getting benefit overpayments because the DWP write them a letter to let them know.
These letters come from the DWP’s debt management department and they’ll include information about when you were being overpaid, how much you were overpaid each week, and the overall amount that they want to recover.
Will you have to pay an overpayment back?
There’s no simple ‘yes’ or ‘no’ answer to whether or not you’ll be expected to pay back what you’ve been overpaid.
The answer depends on the benefit that’s been overpaid. With this in mind, we’ll take a look at each different benefit – but since some overpayments related to older-style benefits, we’re going to cover some benefits here that may have been replaced with newer benefits.
Benefits you usually won’t be asked to pay back
There are some benefits that you usually won’t be expected to pay back if you’ve received an overpayment. These include:
- Income Support overpayment
- Disability Living Allowance (DLA)
- Personal Independence Payment (PIP)
- Employment and Support Allowance (ESA) (but not New Style ESA)
- Jobseeker’s Allowance (JSA) (but not New Style JSA),
Although there will often be a DWP overpayment write off if you’ve received too much of any of these benefits – they will still ask you to pay the money back if they suspect you lied during an application in an effort to be awarded one of these benefits.
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Universal Credit overpayments
Unfortunately, if you’ve been overpaid Universal Credit, the debt will not be written off and you will be expected to pay it back.
This applies to any of the three major benefits covered by Universal Credit:
- New Style Jobseeker’s Allowance (JSA)
- New Style Employment and Support Allowance (ESA)
- Universal Credit
Even if the error was made by the DWP, you’ll still be expected to pay the debt back in full.
If you can prove that you were in-fact entitled to the money that you’ve been overpaid, then there will be no need to pay it back.
In some very rare cases, a universal credit overpayment has been written off if the person it’s been given to can prove that overpayment recovery would leave them unable to cover basic living costs and in extreme financial hardship. However, it’s important to know that this is done on a case-by-case basis any is very rare.
Housing benefit overpayment debt
There are some cases where housing benefit overpayments are written off.
However, it’s important to understand again that these cases are rare and the following circumstances must apply for you to stand a chance of getting your money back:
- If an official error with the council, HMRC, or the DWP has led to you getting the benefit overpayments
- If you did not contribute to the error in any way
- You couldn’t have been expect to know that you were getting more than you were entitled to
If these circumstances apply, you’ll need to explain this in a letter or on the phone to the local council.
If the local benefits office do require the debt to be repaid, they will ask whomever got the overpayment to pay it back. This means it could be you – but could also be your landlord if it was paid to them directly. If they ask you to repay a debt that been paid directly to a landlord, you’ll need to give them a call and let them know they should speak to the landlord instead.
Tax credit overpayment debts
Tax credit overpayments are a common type of overpaid benefits because the benefit is worked out based on you previous year’s income. If you earn more than they predicted, they may need to recover overpayments.
These tax credits overpayments can include child tax credit and working tax credit.
Tax credit debt is never written off – so will always have to be repaid.
How do the DWP take a benefit overpayment back?
If it turns out that you do have to make a repayment of any benefit overpayments, it’s good to understand how the department will recover the debt.
Debts are usually recovered in one of four different ways:
- Deductions could be taken from future benefit payments
- If you are owed any money (usually in back-dated payments) then any debt amount could be taken from this
- The relevant department could set up an attachment of earnings to take money directly from your work salary
- The department you owe could apply for a court order to recover any excess benefit payment
Don’t worry though, you will usually be given options before any court action or direct earnings attachment is set up.
What happens if you refuse to pay the benefits office back?
As you can see, many of the options for recovering overpayments don’t need any input from you. So, the DWP or HMRC have plenty of ways of getting payment even if you’re not willing to make a payment.
It’s very easy to lose any control or input over your benefit repayment plan. If you don’t engage with the team trying to get the overpayment recovered then they could take a large portion of your wages. Also, if they decide the only way to get the money is to take it from future payments, they could take 40% of what you would ordinarily get.
Since this is the case, it’s always best to talk to the department that you owe the money back to and try to come to an agreement about how much you can pay back. They might ask you to provide some details about your living expenses to make sure the amount is affordable – but they’ll usually be happy as long as you stick to your agreed repayment amount.
Won’t the debts be written off after 6 years?
There’s a part of the law that explains how long a creditor (a person or company you owe money to) has got to recover a debt.
A lot of the time, this period is 6 years. So, what happens if you go for 6 years without paying back what you owe?
In theory, the debt will be written off. It becomes ‘statute barred’ – which means even though there is still a record of the debt, there’s no action that can be taken to force you to repay it.
While this might sound appealing in theory, the DWP will never let a payment remain outstanding for this long. Long before this stage, they will start making deductions from your benefits – or they will apply to the court to take money from your wages.
Can debt solutions be used to get an DWP overpayment write off?
Since benefit overpayments can be significant sums of money, we’re often asked if debt solutions can include these kinds of debts.
Fortunately, the answer is usually yes – many debt solutions can be used to write-off this kind of debt, regardless of whether the DWP would usually write it off. The only case where you couldn’t include a benefits overpayment debt is if it’s been proven that you mislead the DWP and committed fraud.
IVAs (Individual Voluntary Arrangements) often include debt owed because of benefits overpayments. In addition to lifting some of the financial pressure you’re feeling because of an overpaid benefits, the company dealing with your IVA will communication with the benefits office on your behalf too – so you don’t have to deal with the extra stress of making the repayment arrangements yourself.