Repaying overpaid tax credits

If you've been paid too much in tax credits - an 'overpayment' - you may have to pay back the extra money. Help is available if you can't afford to pay.

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How do you repay your overpayment?

The Tax Credit Office will either reduce your ongoing payments, or they'll ask you to make a direct payment. This depends on whether you're still getting tax credits or not.

If you're still getting tax credits

If you're still getting tax credits, the Tax Credit Office will reduce your ongoing payments to get back the overpaid amount. But if you've made a new claim after splitting up from or getting together with a partner, they'll ask you to make a direct payment. This is a one-off payment for the full amount.

If you're no longer getting tax credits

If you're not getting tax credits any more, the Tax Credit Office will ask for a direct payment - a one-off payment for the full amount.

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Reducing your ongoing payments

If the Tax Credit Office has paid you too much in tax credits, they may reduce your ongoing payments. This is until you pay back the overpaid money.

The amount they reduce your payments by depends on whether you get tax credits in full, or at a reduced rate. You get tax credits at a reduced rate if your income is too high to get the maximum amount.

Check your award notice to find out if you get tax credits at a reduced rate. If you do, it's shown as 'reduction due to your income' in part 2 - How we work out your tax credits.

If there's no reduction shown, because of your low income, the most that will be taken back from your ongoing payments is 10 per cent.

If you only get the family element of Child Tax Credit, up to 100 per cent will be taken back from your ongoing payments.

For everyone else the Tax Credit Office will take back up to 25 per cent from your ongoing payments.

If your reduced payments are causing you financial difficulties

If you can't meet essential living expenses like rent, gas or electricity bills, the Tax Credit Office may let you pay over a longer period. But if they do this, it'll take you longer to pay back the overpayment.

Call the Tax Credit Helpline to find out what your options are.

Difficulty repaying overpaid tax credits?

Contact details for the Tax Credit Helpline

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Reducing your ongoing payments - examples

Example one

You are currently getting the maximum amount of tax credits with no reduction due to income. Your tax credit payments were £2,613 a year, or £50 a week. The Tax Credit Office will reduce your payments by 10 per cent. So you'll still get 90 per cent of your money. Your new payments will be £2,352 a year, or £45 a week.

Example two

You are currently getting the family element of Child Tax Credit only with a reduction due to your income. Your tax credit payments were £545 a year, or £10.50 a week. The Tax Credit Office will reduce your payments by 100 per cent. So you'll get no more money until the overpayment has been paid back.

Example three

You are currently getting Child Tax Credit and Working Tax Credit with a reduction due to your income. Your tax credit payments were £1,046 a year, or £20 a week. The Tax Credit Office will reduce your payments by 25 per cent. So you'll still get 75 per cent of your money. Your new payments will be £784.50 a year, or around £15 a week.

If you need help to understand how your payments will be reduced, call the Tax Credit Helpline.

Contact details for the Tax Credit Helpline

You can make extra payments if you want to clear your overpayment more quickly. To do this call the Tax Credit Payment Helpline on Tel 0345 302 1429.

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Direct payment

If you're not getting tax credits any more, the Tax Credit Office will ask for a direct payment. This is a one-off payment for the full amount. You still have to repay by direct payment if you've since made a new claim because your household has changed. For example, this could be if you've split up from or got together with a partner.

Making a direct payment

The Tax Credit Office will send you a Statement of Account that gives details of the overpayment. You'll also get a Notice to Pay which tells you how to make your repayment, and includes a payment slip. You'll need to pay within 30 days.

How to make tax credits repayments

What if you can't pay within 30 days?

If you can't pay within 30 days, get in touch with the Tax Credit Office so they can talk through your options. They may be able to:

  • spread the repayment over a longer period
  • put back the date they start to collect the money you owe them

For more information call the Tax Credit Payments Helpline on 0345 302 1429 as soon as possible. They will make a decision based on your circumstances.

You owe less than £3,000 and you're taxed through Pay As You Earn (PAYE)

HM Revenue & Customs (HMRC) can reduce your PAYE tax code to collect your overpayment. This means you'll pay back all of what you owe by paying more tax in the next tax year. A tax year runs from 6 April one year to 5 April the next.

This will only happen if you haven't contacted the Tax Credit Office about repaying your overpayment, and all of the following apply:

  • you've been asked to make a direct payment
  • you work for an employer, or get a UK-based pension
  • your overpayment is less than £3,000

You can’t choose to pay your overpayment back through your tax code voluntarily.

HMRC will write to you if they decide to collect your overpayment by reducing your tax code. If you don't want your tax code to be changed, get in touch straight away to agree another way of paying. There will be a contact telephone number in the letter.

If you're happy for your overpayment to be collected this way, you don’t need to do anything. Then before the next tax year, HMRC will send you a 'PAYE Coding Notice' telling you what your tax code will change to. The amount to be collected from you will be shown on the notice as 'Outstanding debt'.

More about common entries on your PAYE Coding Notice

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If you're paying back more than one overpayment at the same time

Some of your repayments can be stopped temporarily, as long as both of the following apply:

  • you're currently paying back one overpayment by direct payment, or by a reduction in your PAYE tax code
  • you're also paying back another overpayment from your ongoing tax credits payments - but only if your payments have been reduced by 10 per cent or 25 per cent

If this applies to you, you can ask for the direct payment, or the reduction in your PAYE tax code, to be stopped temporarily. This is until you've paid back the overpayment from your ongoing tax credits payments. Get in touch with the Tax Credit Office.

If this doesn't apply to you, and you can't meet essential living expenses such as rent, gas or electricity bills, contact the Tax Credit Office. They'll tell you what your options are.

You can contact the Tax Credit Office by calling the Tax Credit Helpline

Difficulty repaying overpaid tax credits?

Contact details for the Tax Credit Helpline

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You've split up from your partner - who's responsible for repaying an overpayment?

If you live with a partner, you must make a joint tax credits claim, which means you are both responsible for paying back any overpayment. The Tax Credit Office will write to you both telling you about the overpayment.

If you have split up with your partner, you can try to agree between yourselves what each of you should pay back. If this agreement doesn't work, the Tax Credit Office will ask each of you to pay half the amount.

Help is available if you can't afford to repay the money.

You have separated and have a joint tax credits overpayment

Tax credits when your partner leaves or a new partner moves in

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More useful links

How to avoid being overpaid tax credits

How to dispute a tax credits overpayment

Download a leaflet 'What happens if we have paid you too much tax credit? (PDF 544K)

What could happen if you don’t pay HMRC

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