Tax Credits Overpayments - How are tax credit overpayments recovered?

Tax credit overpayments may be recovered by:

• Deduction from your on-going tax credit award;
• Direct recovery from you;
• Deductions from a Universal Credit award;
• Direct recovery from bank accounts;
• Court action. 

If you are still receiving tax credits, the overpayment will be recovered from your on-going award. In some cases, HMRC can recover old overpayments from new claims, even if the people claiming are different. For example, a new joint claim can be reduced to recover debts from an old single claim that you or your partner had.

Your award may be reduced by 10%, 25%, 50%, or 100% of the amount you would otherwise receive, depending on your circumstances. See HMRC's 'Tax Credits: What happens if I've been paid too much' guidance for further information.

If recovery from your on-going tax credits is not possible, you will be asked to repay the full amount and given contact details to make a different arrangement. If the overpayment was on an award paid on your joint claim as a member of a couple, the overpayment may be recovered from you or your joint claimant. Normally, you will only be asked to repay 50% of an old joint overpayment debt and your former partner will also be asked to repay 50%.

If you move from tax credits to Universal Credit, the Department for Work and Pensions (DWP) will recover any tax credit overpayment debt from your Universal Credit payments. It is also planned that DWP will start recovering other old tax credit debts even if you are not moving to Universal Credit - this means they will be able to ask your employer to deduct payments directly from your wages.

If you do not repay, you may face court action. This must normally be started within six years of the overpayment decision (five years in Scotland).

If you are threatened with court action, you should seek advice from a benefits adviser as soon as possible. HMRC may also try and remove goods from your property, or they may take the money directly through your bank account in more serious cases.  This is called 'direct recovery of debt'.

Reviewed: August 2022