Repaying benefit overpayments can be a stressful experience if you discover you have received them. Benefit overpayments are common, but it is often challenging to find clear information about why they occur, whether they can be waived, and the appropriate next steps.
We receive numerous requests for debt advice each week, so we have created a guide to clarify the government’s guidelines on overpaid benefits.
What are benefits overpayments?
GOV.UK states an overpayment is a “benefit that the claimant has received but is not entitled to”.
It is important to note that receiving a benefit overpayment does not necessarily mean the recipient intentionally took more money than they were entitled to. In many cases, overpayments occur due to genuine errors, either on the part of the Department for Work and Pensions (DWP) or because the claimant was unaware that their entitlement had changed.
How does a benefit overpayment happen?
Benefits overpayments can occur due to various reasons, with the most frequent ones being:
- DWP, HMRC, or local authority errors.
- The information you provided when applying for the benefit was not accurate.
- You did not inform the DWP about changes in your situation.
Benefits overpayments often occur due to errors or mistakes like those mentioned above. However, there are some cases where the situation may be more complex:
- If a person stops claiming the benefit shortly after receiving it, they do not have to repay the benefit advance.
- The individual receiving the benefit has knowingly provided false information, which amounts to committing benefit fraud.
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What should you do if you realise you’re being overpaid?
If you receive more benefit payments than you are entitled to or receive benefits you are not supposed to receive, it is important to inform the benefit provider immediately. Although it may be tempting to keep the extra money, withholding this information could result in fines or legal action.
Remember that the DWP will eventually detect any errors, so it is important to address overpayments as soon as possible. The longer the overpayment persists, the larger the amount you will be required to repay.
What if the DWP lets you know you’ve received benefits overpayments?
You will typically receive a letter from the DWP if they discover a benefits overpayment before you do.
Typically, you can expect a letter regarding the overpayment from the DWP debt management department. This letter should contain details about the overpayment, such as:
- The timeframe that you were overpaid
- The amount of overpayment you received each week
- The sum total that has been overpaid
Will you have to repay the overpayment?
The requirement to repay an overpaid benefit depends on the specific type of overpaid benefit. Each benefit has its own set of regulations governing overpayments. Please note that while we cover a range of benefits in this information, some may no longer be in effect and may have been replaced.
We will discuss the benefits of:
- Income Support
- Personal Independence Payment (PIP)
- Disability Living Allowance (DLA)
- Jobseeker’s Allowance (JSA) (excluding New Style JSA)
- Employment and Support Allowance (ESA) (excluding New Style ESA).
Generally, you don’t have to repay any overpaid benefits. But if you intentionally misrepresented information or didn’t disclose something while making a claim, the benefits office may ask you to repay the overpaid amount.
Universal credit overpayments
The Universal Credit system offers coverage for three main benefits, namely:
- Universal Credit
- New Style Jobseeker’s Allowance (JSA)
- New Style Employment and Support Allowance (ESA)
Regardless of the cause of an overpaid universal credit benefit, you will always be required to repay the money owed. Even if the overpayment was due to an error by the DWP and you were unaware, they will still attempt to recover the benefit overpayments. While this rule has a few exceptions, it is uncommon to have overpayment debt forgiven.
You can inform the DWP that you are experiencing severe financial hardship. Tell them that if they recover the debt, they won’t have enough money to cover their basic living expenses, according to the GOV.UK guide on overpayment recovery, the DWP team can use their discretion not to recover a debt. However, it’s uncommon for this to happen, even if you provide compelling evidence that it would leave you short.
To have your debt written off, you can prove it was a benefit payment you were entitled to receive instead of an overpayment. You will need to provide detailed evidence and explain to the DWP that there was no mistake in the payment.
The local benefits office will usually recover housing benefit overpayments.
There are certain situations where recovery of funds is not possible. This includes cases where the overpayment was caused by an “official error” made by the local council, DWP, or HM Revenue and Customs (HMRC), and you did not contribute to the error. Also, recovery may not be possible if you could not have reasonably known that you were receiving an overpayment.
If there has been an overpayment of housing benefits, the amount will be recovered from either the person who received the overpayment or the one who caused it.
If the local council is trying to recover an overpayment made to your landlord, seek advice from a benefits advisor. They may need to communicate with your landlord about the matter. The local council is also referred to as the “local authority.”
Tax credit overpayments
HMRC calculates the tax credits you’re entitled to at the end of each tax year based on your income. If your income is higher than expected, you may receive more tax credits than you should have. This will result in an overpayment, which you’ll have to repay and won’t be forgiven. The DWP debt management team handles these overpayments of tax credits, including child tax credits and working tax credits.
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How is an overpayment recovered?
You should now understand which overpayments can and cannot be recovered. If it is impossible to write off your overpayment, then you need to know the method by which it will be collected.
The DWP has three common methods to recover benefit overpayments:
- Making deductions from your future benefit payments.
- Deduct the amount from any arrears or back-dated payments owed to you.
- Using a direct earnings attachment to deduct money from your wages.
- Sometimes, the DWP may also obtain a court order for debt recovery.
What happens if I refuse to pay back overpaid benefits?
Even though it is not recommended, some individuals may choose not to repay benefits they were overpaid or ignore DWP letters explaining how the debt will be repaid. Even if you refuse to pay, the DWP and other departments that manage benefits overpayments have various methods for collecting debt. As a result, they will probably be able to collect the debt from you.
If you fail to make payment, you may receive reminder letters and calls from a debt collection agency during the standard debt collection process. Nevertheless, the DWP offers alternatives that do not require payment from you. These include collecting the money from your future benefits or wages. The DWP may request an “attachment of earnings” from the court. This attaches a percentage of your wages before the amount is paid to your bank.
The DWP can take back the money you owe from your future benefit payments, and the amount they take can be as much as 40% of what you receive. This will reduce the amount of money you get. To avoid this, it’s best to speak to the DWP debt management team and negotiate a payment plan that is reasonable for you. The debt management team is usually flexible and may agree to allow you to repay the amount over a long period.
Will benefits overpayments be written off after 6 years?
Many believe that debts disappear if ignored for 6 years since a person’s credit rating only covers this period. However, we have written a blog post that delves into this topic and explains how long you can be chased for debts.
According to theory, a benefits overpayment debt may become ‘statute barred’ after 6 years. If a debt is statute-barred, no legal options are available to recover the money. Therefore, most companies or government departments would consider it permanently lost.
As we have already discussed, it is highly improbable that any overdue debts to the DWP could remain uncollected for such a long time. The government has more methods to collect debts than financial institutions or credit companies.
In theory, any debt owed to the government, such as overpaid benefits and council tax, can be written off after 6 years. However, in practice, the DWP will not allow debt to remain outstanding for that time.
What is a civil penalty for an overpaid benefit?
While it is uncommon, the DWP may refer to ‘civil penalties’ regarding receiving more benefits than being entitled to.
A civil penalty may be imposed if it is believed that you intentionally provided false information to the system to receive more benefits than you are entitled to. This behaviour is classified as benefit fraud, and any debts resulting from it will be collected, along with a civil penalty fine. Here are some scenarios where a civil penalty may be enforced:
- The information you have given about your income or savings is not accurate.
- You have made a false claim about being unable to work due to illness or injury.
- You don’t report any address change.
- You are pretending to pay a higher rent than you pay.
- If someone moves in or out of your home and you don’t inform the authorities.
If the investigation finds that there has been an overpayment, then a civil penalty of £350 to £5,000 will be imposed, depending on the circumstances. If the overpayment was due to a fraudulent claim, you can appeal the decision, but it’s important to seek legal advice in this situation.
Can benefits overpayments be written off any other way?
While we have discussed the various ways benefits overpayments can be written off, it is essential to recognize that certain debt solutions can assist with writing off most types of unsecured debts, including certain types of benefits overpayments.
If you made an overpayment by mistake, an IVA provider can discuss adding it to your overall debt to pay off. Additionally, the insolvency practitioner assigned to your case will handle all communication with the DWP, so you won’t have to deal with calls and letters. This only applies to overpayments made in error, not those caused due to fraud.
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Frequently Asked Questions
Can I get my DWP debt written off?
No, DWP debt cannot be written off except in very rare cases of official error. You are obligated to repay any overpayments. 
How many years can the DWP go back for an overpayment?
DWP can legally go back up to 6 years to identify and recover overpayments. 
Can overpayment be written off?
Overpayments of DWP benefits generally cannot be written off. You must repay unless it was official error.
How much can DWP take for an overpayment?
DWP can deduct up to 15% of your benefit amount to repay overpayment debts. 
Can the DWP check my bank account?
Yes, the DWP can request access to bank statements to check income sources and any erroneous payments. 
What happens if you can’t pay DWP back?
If you cannot repay, DWP will deduct from future benefits or pursue debt collection actions like civil courts. 
What happens if you ignore DWP letters?
Ignoring DWP letters will likely lead to benefit reductions or sanctions. Contact them promptly to discuss repayment. 
How far back can benefit overpayment go?
DWP can legally go back up to 6 years to identify and recover any benefit overpayments. 
Did DWP lose court case?
Yes, the DWP recently lost a court case challenging the legality of their blanket benefit deductions. 
Do the DWP always prosecute?
DWP can prosecute for fraud but evaluates cases individually. Repayment plans may avoid prosecution. 
What’s happening with the DWP court case?
The court ruled some DWP deduction practices unlawful. The impact on future cases is being determined. 
Will DWP know if I get compensation?
Yes, the DWP can access compensation payout info to recover any outstanding debts. Inform them if receiving compensation.