What are benefits overpayments?

According to GOV.UK, an overpayment is a “benefit that the claimant has received but is not entitled to”.

This wording can make it sound like the person who’s received the benefit overpayment has knowingly taken more money than they’re allowed – but this is rarely the case.

More often than not, overpayments occur because there’s a genuine error. Sometimes this is down to the Department for Work and Pensions (DWP) – and sometimes it’s because the person who is claiming the benefit doesn’t realise their entitlement has changed.

How does a benefit overpayment happen?

There are lots of reasons that benefits overpayments happen. The most common reasons include:

• DWP, HMRC, or local authority errors
• You’ve provided incorrect information when you applied for the benefit
• Your circumstances have changed and you didn’t let the DWP know

Most benefits overpayments happen because of simple mistakes or errors like the ones above – but there are some situations where things are a little more complicated:

• Benefits advances cannot be repaid as the person stops claiming the benefit shortly afterwards
• The person claiming the benefit has knowingly provided incorrect information and is therefore committing benefit fraud

What should you do if you realise you’re being overpaid?

If you realise that you’re getting benefit payments and they’re either too much or you’re not supposed to be getting them, you should always tell the benefit provider straight away.

It can be tempting to keep quiet about overpayments, especially if money is tight, but if you do, you could end up being fined or prosecuted.

It’s important to remember that the DWP will realise there’s an error sooner or later. The longer any overpayment goes on for, the more you’ll end up having to pay back.

What if the DWP lets you know you’ve received benefits overpayments?

If you’ve received a benefits overpayment and the DWP realises before you do, you’ll usually get a letter informing you.

The letter will usually come from the DWP debt management department. The letter should give you information about the overpayment, including:

• The time period that you were overpaid
• How much you were overpaid each week
• The total amount that has been overpaid

Will you have to repay the overpayment?

Whether or not you’ll have to repay overpaid benefit will depend on the benefit that has been overpaid.

There are different rules for different benefits. Since overpayments may have occurred before new benefits were introduced, some of the benefits we cover here are not current and may have been replaced.

First, we’ll talk about the following benefits:

• Income Support
• Personal Independence Payment (PIP)
• Disability Living Allowance (DLA)
• Jobseeker’s Allowance (JSA) (but not New Style JSA),
• Employment and Support Allowance (ESA) (but not New Style ESA)

If you have been overpaid any of these benefits, you usually cannot be asked to pay it back. However, if the benefits office can prove that you purposefully misrepresented something or didn’t tell them something when you claimed, they can still ask you to pay it back.

Universal credit overpayments

The Universal Credit award system covers three major benefits. They are:

• Universal Credit
• New Style Jobseeker’s Allowance (JSA)
• New Style Employment and Support Allowance (ESA)

If you owe money because of an overpaid universal credit benefit, you will always be expected to repay the money.

Unfortunately, this applies no matter what caused the overpayment. So even if it was a DWP error and you did not know, they will still try to recover benefit overpayments.

There are a couple of exceptions to this rule – but you should be warned that it’s rare for overpayment debt to be written off.

Firstly, you can explain to the DWP that you’re in severe financial hardship and that them recovering the debt would leave you short of basic living costs. In the GOV.UK guide to overpayment recovery, it’s explained that the DWP team can ‘exercise their discretion not to recover a debt’. However, it is rare that this happens – even when the DWP are given strong evidence that it would leave you short.

The only other way to get this debt written off is to prove that it wasn’t ever a debt – but in fact a benefit payment you were entitled to. To do this, you’ll need to carefully show all your working out and write to the DWP explaining that there was no overpayment made.

Housing benefit

Most of the time, housing benefit overpayments will be recovered and it will be the local benefits office that organise the recovery action.

However, there are some circumstances that mean they cannot be recovered:

• If it was caused because of an ‘official error’. This means a mistake made by the local council, the DWP, or HM Revenue and Customs (HMRC)
• You did not contribute to the error
• You couldn’t have reasonably been expected to know you were getting an overpayment

Overpayments of housing benefit will either be recovered from the person who got the overpayment or the person who caused the overpayment.

If the local council (sometimes called the ‘local authority’) try to get an overpayment back from you but the overpayment was made to your landlord, you should talk to a benefits advisor and let them know as they may need to talk to your landlord instead.

Tax credit overpayments

The amount of tax credits you’re entitled to is worked out by HMRC at the end of ever tax year. They’ll look at how much income you received, and if it’s more than they expected, it may turn out that you’ve been paid too much in tax credits.

If you’ve been overpaid tax credits (including child tax credit and working tax credit) and therefore have tax credit debt, this will have to be repaid and will not be written off.

These overpayments will be handled by the DWP debt management team.

How is an overpayment recovered?

Hopefully now you have an idea of which overpayments can and can’t be recovered.

If there’s no way of having your overpayment written off, it’s crucial that you know how any overpaid will be collected.

The most common ways that the DWP will recover a benefit overpayment are:

• By making deductions from future benefits payments
• Taking the amount out of arrears or back-dated payments that are owed to you
• Using a direct earnings attachment to take money from your wages
• Getting a court order for debt recovery

What happens if I refuse to pay back overpaid benefits?

Although it’s not advisable, some people will refuse to pay back overpaid benefits – or just ignore letters from the DWP explaining how debt will be recovered.

The DWP and other departments that handle benefits overpayments have different ways of collecting debt – so even if you refuse to pay, it’s still highly likely that they’ll still be able to recover the debt from you.

In some cases, a fairly standard debt collection process will be followed. You will get reminder letters – then letters and calls from a debt collection agency if you still don’t make payment.

However, many of the options that the DWP have don’t need any payment from you – as they involve collecting the money directly from future benefits or your wages. In cases like these, the DWP can apply to the court to make an ‘attachment of earnings’ – which will take a percentage of your wages before it’s paid into your bank.

The DWP also have the power to deduct repayments from your future benefits payments. In some cases, the amount recovered can be up to 40% of your benefit amount – which significantly reduces what you’ll be paid.

With this in mind, it’s always better to talk to the DWP debt management team and try to come to an arrangement that works for everyone. The debt management team tend to be quite flexible and will usually agree to a reasonable repayment plan, even if it’s over a long time.

Will benefits overpayments be written off after 6 years?

Since a person’s credit rating only covers a period of 6 years, lots of people think that if you can ignore a debt for this amount of time, it disappears.

In theory, a benefits overpayments debt could become ‘statute barred’ after 6 years. When a debt is statute barred, it means there are no legal options left for recovering the money – so most companies or government departments will consider it gone forever.

However, it’s extremely unlikely that outstanding debts to the DWP could ever go this long without being collected. As we’ve already discussed, the government has lots of options when it comes to collecting you debt – far more than a financial organisation or credit company.

So, in theory, anything you owe to the government (like benefits overpayment and council tax debt) could be written off after 6 years – but in reality, the DWP will never let a debt be outstanding for this long.

What is a civil penalty for an overpaid benefit?

Although it’s quite rare, you may see the DWP talk about ‘civil penalties’ relating to overpayment of benefits.

This usually applies when they think you have deliberately mislead the system to claim more than you were entitled to. This is considered benefit fraud. Any debt relating to this kind of fraud will be pursued and recovered – and a civil penalty fine will often be added on top of what you owe.

Let’s take a look at some examples of when a civil penalty might apply:

• You have provided incorrect information about your income or savings
• You have falsely declared that you cannot work due to illness or injury
• You don’t report a change in address
• You pretend to pay more rent that you actually pay
• You don’t tell the authorities when someone moves in or out of your home

A civil penalty is usually between £350 and £5,000 and will decided on after an investigation has taken place.

If it is decided that an overpayment is due to a fraudulent claim, you can appeal this decision. If you find yourself in this situation, it’s very important that you seek legal advice.

Can benefits overpayments be written off any other way?

Although we’ve explored most of the ways benefits overpayments can or can’t be written off, it’s important to understand that there are debt solutions that can help write off virtually any unsecured debt – including many kinds of benefits overpayment.

As long as an overpayment has been made in error (rather than due to fraud) then an IVA provider will be able to talk to you about including it as part of the overall debt you’ll pay off. What’s more, the insolvency practitioner dealing with your case will take over all communication with the DWP – so you won’t have the stress of dealing with the calls and letters either.