With the cost of living on the rise, people are trying to make their money stretch further than ever before. So if you discover you’ve been overpaid benefits and have to pay the money back, it’s normal to worry about how you’re going to afford it alongside your usual monthly outgoings.
But by understanding benefits overpayments and the most common reasons behind it, you can be more prepared to deal with it in the event it happens to you.
What are benefit overpayments?
The Department for Work and Pensions (DWP) is the government department responsible for calculating benefit payments, which are regular payments from the government designed to help people on low incomes with basic living costs.
These payments are based on the financial situation of the individual at the time of applying so, in most cases, the amount awarded is reflective of their circumstances.
However, a benefit overpayment can happen if you or the DWP makes a mistake that leads to you receiving more money than you’re entitled to.
The phrase ‘benefit overpayments’ can make it sound like the person receiving the benefits is at fault, but this isn’t always the case.
How much debt do you have?
Why do benefit overpayments happen?
Benefit overpayments can happen for a variety of reasons. We’ve outlined the most common reasons below:
The benefits office made an administrative error
The DWP processes thousands of benefits applications every week and while great care is taken to ensure all information is handled correctly, administrative errors are always a risk.
For example, if you’re placed in the wrong benefits category, you may be paid more than your financial situation entitles you to and this can go unnoticed for some time.
You failed to report a change of circumstances
Benefit payments are based on your financial situation (e.g. your income, savings, and housing costs) at the time of applying so it’s important to inform the benefits office of any changes that would affect your monthly benefit entitlement.
For example, if you get a new job, move house, or inherit money, there’s a good chance that your benefit amount will change and you’re at risk of being overpaid until you inform the benefits office.
You committed benefit fraud
While extremely rare, benefit overpayment can also occur as a result of committing benefit fraud. This is when you deliberately provide false information in an attempt to qualify for more benefits.
However, when the DWP inevitably finds out that you’ve done this, you’ll be required to pay back the extra money in full and may even face legal consequences, such as a fine or a prison sentence.
What are the most common types of benefits overpayments?
Most types of benefits can be overpaid. We’ve outlined the most common types below:
Universal Credit overpayments
Universal Credit (UC) is the most common type of benefit in the UK and works by combining several other benefits into a single monthly payment to help people who are on a low income or are unemployed. This automatically makes it the most common type of benefit overpayment.
Housing Benefit overpayments
Housing Benefit is designed to help with rent or mortgage costs for people who are unemployed, on a low income, or are already receiving certain benefits. From June 2024, it will gradually be replaced by UC.
Tax Credit overpayments
Tax Credit is made up of Working Tax Credit and Child Tax Credit – both of which are designed to help people on a low income boost their earnings. From August 2024, it will gradually be replaced by UC.
I think I’ve been overpaid benefits. How should I respond?
Benefits overpayments should be dealt with quickly so it’s important that you address the problem as soon as you become aware of it. The longer you wait to report the benefit overpayment, the more debt you will have to pay back.
This can be done by contacting DWP Debt Management on 0800 916 0647 or calling the UC helpline on 0800 328 5644 and providing proof of the overpayment. Remember to provide as much evidence as possible and, if possible, keep a note of when you call and who you talk to for future reference.
The benefits office might also contact you if they discover that your benefit payments are greater than they should be. When this happens, you’ll receive a letter informing you of your new benefit amount and how much you owe in overpayments. This letter should include the weekly overpayment amount, the total overpayment amount, and the period during which you were overpaid.
Even if the overpayment wasn’t your fault, the DWP will almost always instruct you to repay the extra money.
“No fuss, just simple, honest advice. Communication is good and they make the process as easy as they can.”
Can I challenge a benefits overpayment?
Yes, you can appeal against a benefit overpayment claim by asking for a ‘mandatory reconsideration’ within one month of receiving the decision. This is essentially a way of asking the DWP to revisit your claim and consider whether they made a mistake in asking you to repay the benefit overpayment.
However, it can be difficult to get the DWP to admit they made a mistake and you’ll usually only be able to reverse a benefit overpayment if you have sufficient evidence to prove that it was wrongfully issued. Remember to send copies of the evidence alongside your mandatory reconsideration and make a note of when you sent it.
This can be done by filling in this request form on the GOV.UK website or writing a letter to the DWP to ensure you have written proof of everything.
How does the DWP recover benefit overpayments?
The DWP can recover benefits overpayments in a number of ways but will typically reclaim the money by:
- Deducting money from future benefits payments
- Taking the money from your wages with a Direct Earnings Attachment (DEA)
- Making deductions from arrears or back-dated payments
- Getting a court order to recover the money
Most overpayments will be recovered by deducting money from future benefits payments but if you’re no longer receiving benefits, you’ll likely be asked to repay the amount owed in full or to set up a repayment plan.
What happens if you don’t repay benefit overpayments?
Benefits overpayments are classed as a priority debt if you’re no longer receiving benefits, meaning there can be serious consequences for refusing to pay them back. Here are some of the things that can happen if you don’t repay benefit overpayments:
You’ll be visited by a debt collection agency
Usually, unpaid benefits overpayments will be passed to an external debt collection agency or debt collector who will get in touch with you to try to recover the debt.
They may visit your home or place of business to discuss repayment of the debt with you but they don’t have any extra legal powers to collect the debt or seize your assets.
You’ll be issued with a civil penalty
Sometimes, you’ll be issued with a ‘civil penalty’ for refusing to repay a DWP benefit overpayment, which is a fine ranging from £50 to £200 depending on the circumstances.
There are also certain eligibility criteria that you must meet to be served with a civil penalty. For example, the entirety of the overpayment must have occurred after 1 October 2012, amount to £65.01 or more, and must be recoverable.
However, it’s worth noting that civil penalties are usually reserved for cases of deliberate benefit fraud and it’s up to your local authority to decide whether they think it’s a suitable action to take.
You will be contacted by the DWP enforcement team
The DWP enforcement team may send you a letter asking you to set up a repayment plan to repay the debt.
Failure to stick to the repayment plan will lead to them submitting a claim against you to HM Courts and Tribunals Service (HMCTS) and extra legal costs will be added to your final balance.
This will need to be paid within six months or you’ll receive a County Court Judgment (CCJ), which is a court order instructing you to repay the debt that affects your credit score for up to six years.
Debt help tailored to you
From writing off a large portion of your debt, to readjusting your budget, we’ll find a solution that suits you.
Do benefit overpayments expire after six years?
The Limitation Act (1980) is a part of UK law that provides timescales for how long legal action can be taken against an unpaid debt. This is known as the ‘limitation period’ and, for most debts, is six years.
However, while the limitation period for benefits overpayments is technically six years, the DWP has extra powers to recover the money owed and will rarely let this much time pass without taking action to recover the debt.
Typically, benefits overpayments will be recovered through future benefit payments and this will start as soon as the DWP become aware of the overpayment.
The only time the DWP is likely to agree to write off the debt is if they believe it is hurting the health and wellbeing of you or your family. They will write to you to explain why they have decided to do this.
Do I have to repay overpaid benefits?
The benefits office will request that you repay benefits overpayments if the mistake occurred due to ‘misrepresentation’ or ‘failure to disclose’ – even if it wasn’t your fault. We cover both of these situations in more detail below:
Misrepresentation
Misrepresentation is when you provide information on your application form that is incorrect or incomplete. This is why it’s so important to answer any questions the benefits office asks you correctly and never guess if you’re unsure.
Remember to read over the benefit award letter when it arrives to ensure everything looks as it should and matches the information you provided on your application form.
Failure to disclose
Failure to disclose is when you omit key information from your application form or fail to inform the benefits office of a change of circumstances after you’ve started receiving benefits.
Even if you’re unsure what information you need to disclose, it’s always better to be open and honest from the beginning and ask the benefits office if you’re unsure.
Does the DWP ever write off benefits overpayments?
The DWP may agree to waive your benefits overpayments in some situations, but this is only done in exceptional circumstances (e.g. where recovery action would cause severe distress or impact the welfare of you or your family).
They will investigate what led to the overpayment and inform you of their decision. There may be a greater chance of you getting a benefit overpayment written off if it’s discovered that the error was the DWP’s fault as opposed to yours.
During their investigation, the DWP will consider your financial situation, the impact that debt recovery would have on you or your family, and whether you can prove that you did not benefit financially from the overpayment.
When you write to the DWP to ask for your debt to be written off, you must include as much information and evidence as possible, including a list of your debts, details of your income and expenditure, and any steps you took to prevent the overpayment from happening.
How can I avoid being overpaid benefits?
Though benefits overpayments can be unavoidable, there are some steps you can take to avoid being overpaid. We’ve outlined them below:
Complete your benefits application form truthfully
Providing accurate information in your benefits application form is the first step to ensuring there are no errors made on your part.
The benefits office may also ask follow-up questions when you apply, which you must answer promptly and to the best of your knowledge.
Report a change in circumstances
Because benefits payments are based on your financial situation at the time of applying, you must report any changes to the benefits office as soon as possible.
This must be done if you get a new job, inherit money, lose your job, move house, move in with someone, or get a pay rise.
Read all correspondence carefully
Read all letters, emails, and leaflets carefully to ensure your personal information is correct and up to date – especially on your benefit award notice.
This can also help you understand which changes you need to report to the benefits office.
Report any suspicious or duplicate payments
The key to minimising the impact of benefits overpayments is to act quickly.
Remember, the longer you ignore any suspicious or duplicate payments in the hope that you get to keep the money, the more debt you’ll rack up in the long run.
Conclusion
Whether you have Universal Credit or Tax Credit debt, the DWP will almost always require you to pay back any benefits overpayments you receive – especially if they can prove that you were responsible for the error.
They usually do this by deducting the overpayment from future benefits payments or asking you to set up a repayment plan but they can also take the money owed from your wages with a Direct Earnings Attachment (DEA).
The DWP may agree to write off benefits overpayments so you don’t have to repay them, but this only happens in rare circumstances.
