TAX CREDIT REPAYMENT: What happens if you receive excess payments from the Tax Credit Office? You must repay any (all) overpaid tax credits unless your rights to benefits allows it.
Failing to pay back the money can cause your future tax credits to drop or stop altogether. In most cases tax credit overpayment occurs because:
- Claimants fail to renew the tax credits claim in due time.
- The Tax Credit Office makes a mistake (or the claimant does).
- A change in your circumstances takes place (even when you report the change on time).
HM Revenue and Customs are responsible for collecting tax credit repayments. They can use enforcement action if you fail to repay tax credits. They enforce the rules by collecting the money you owe to them straight from your earnings.
The Tax Credit Office will inform you how much you owe and how you can repay the money. You should call the Tax Credit Overpayment Helpline if you believe they made the mistake.
You could owe money for an HMRC overpayment while you switch from tax credits to Universal Credit. You would still need to repay it until the money from Universal Credit balances the money owed to the Tax Credit Office.
Repaying Tax Credits
HMRC Overpayment if You Still Get Tax Credits
HMRC automatically reduce your future tax credit payments until the money you owe is repaid. The reduction amount usually depends on your household income and the level of tax credits you get.
The tax credit table shows how HM Revenue and Customs use automatic reduction for your future tax credit payments.
| Household Income | Percentage Reduction |
|---|---|
| £20,000 (or less) and you receive maximum tax credits | 10% reduction |
| £20,000 (or less) and you receive less than the maximum tax credits | 25% reduction |
| More than £20,000 | 50% reduction |
Note: Your repayment of tax credits reduce by 100% no matter what your income is if you only get the family element of Child Tax Credit.
Overpayments if You Do Not Get Tax Credits Any Longer
What happens if you receive overpayments and then stopped getting tax credits? In this case HMRC send out a ‘notice to pay‘. You must pay this 30 days and you must ensure payments reach HMRC in good time. So, it is always best to check the processing times and transaction limits of your bank.
Note: Phone the Tax Credits Overpayments Helpline if you are unable to repay straight away. In some cases they allow you to make payments over a longer period of time. Make sure you have your income, living expenses, and savings details when you call them.
Methods for Repaying Tax Credits Overpayments
Pay by NDDS Direct Debit System
The tax credits repayment helpline can help you to set up a Direct Debit. You can also set one up through your HMRC Government Gateway online account. Most people use these for Self Assessment tax returns.
An option to choose the HMRC NDDS Direct Debit option is usually placed on the left hand side of the facility. You can find your tax credits overpayment number on your notice to pay.
Note: These types of payments appear as ‘HMRC NDDS’ on your bank statements. NDDS stands for the National Direct Debit System and it takes around 5 working days to set up.
Faster Payments (online and telephone banking)
You can also pay online to the HMRC account using your tax credits overpayment number as the payment reference. The Faster Payments facility usually reaches HMRC on the same day (or the day after).
This is a preferred method of paying back tax credits because it is quicker even on weekends and UK bank holidays.
| Sort Code | Account Number | Account Name |
|---|---|---|
| 08 32 10 | 12001039 | HMRC Cumbernauld |
Those who pay from an overseas account can pay HMRC in pound sterling or another currency.
| Account Number (IBAN) | Bank Identifier Code (BIC) | Account Name |
|---|---|---|
| GB62BARC20114770297690 | BARCGB22 | HMRC Cumbernauld |
Her Majesty’s Revenue and Customs Bank Address
Barclays Bank PLC
1 Churchill Place
London E14 5HP
United Kingdom
Pay Through Your Bank or Building Society Account
Use the HMRC payslip (included with the notice to pay) when you want to make a payment at your bank or building society branch. You can pay by cash or cheque using this method.
Make any cheques payable to ‘HM Revenue and Customs only‘ followed by your tax credit reference number. HMRC accept your payment on the date you make it (not the date it reaches their account).
Pay at a Post Office
You can pay at a Post Office by debit card, cash or cheque. Make cheques payable to ‘Post Office Ltd’ and take the payslip that HMRC sent to you. HMRC accept your payment on the date you make it (not the date it reaches their account).
Pay by Cheque (mail)
Make any cheques payable to ‘HM Revenue and Customs only‘ followed by your tax credit reference number. Remember to include the payslip and allow 3 working days for your payment to reach HMRC.
HMRC
Direct
BX5 5BD
Note: Avoid folding your payslip (or cheque) or fastening them together. Include a note inside the envelope if you want them to send you a receipt.
What Happens if You Do Not Have a Payslip?
Those who do not have a payslip should include a note along with:
- Your full name, your address, and contact telephone numbers.
- Your tax credit reference number (on your notice to pay).
- How much you are paying and the period you are paying back overpaid tax credits.
How to Make Extra Payments (clear the debt)
In some cases you may choose to make extra payments and clear the debt more quickly. You should call the Tax Credit Payment Helpline if this option suits you.
Time Limit If You Cannot Pay
What happens to the debt if you are unable to pay the money? HM Revenue and Customs can help you pay the money you owe by changing your tax code. They will correspond with you by letter explaining how this process works.
You must contact the Tax Credit Payment Helpline within 30 days of getting the tax credits overpayment letter. This will help to avoid the debt recovery process.
What If You Cannot Afford the Repayments?
Claimants having financial difficulty can sometimes pay back what they owe over a longer period. Doing so means you would be paying a lower amount each week or each month.
If so, they may ask you to provide some proof that you cannot afford the repayments. Typical examples of proof would be bank statements, payslips, or receipts.
Asking HMRC to Reconsider the Repayments
You should contact HMRC without delay if you want them to reconsider your repayments. As a rule, they will ask you to provide information about:
- Any sources of income or savings that you have (including benefit claims and pensions).
- Your usual living expenses. This can include a mortgage, rent, childcare payments, and household costs.
- Any other kinds of repayments that you have to make. Typical examples include credit cards, loans, and repayment of utility bills.
There are several different ways to contact HMRC. It will depend on whether you still qualify for tax credits or not.
Still Qualify for Tax Credits
HMRC may reduce your tax credits to pay back an overpayment. In this case, the method used to ask them to reconsider can be either:
- Online (you will need a Government Gateway account unless you already have one).
- By calling the helpline.
Note: As a rule, you will get a decision within fourteen (14) days. You can ask HMRC to reconsider the payments again if you are still having financial difficulty at the end of the financial year (5th of April).
Do Not Qualify for Tax Credits
If you do not qualify you may get a ‘notice to pay’ or you may be paying back an overpayment ‘directly’. In this, you should call the tax credits payments helpline to ask for a reconsideration by HMRC.
HM Revenue and Customs
Tax Credits Payments Helpline
Telephone: 0345 302 1429
Monday to Friday: 8am to 8pm
Saturday: 8am to 4pm
Sunday: 9am to 5pm
HMRC
Direct
BX5 5BD
United Kingdom
Tax Credit Overpayment Helpline for Universal Credit
You should continue repaying the Tax Credit Office until you get a letter from HMRC. The overpayments letter TC1131 tells you how much you owe. You are likely to get the TC1131 letter a few months after moving over to Universal Credit.
The Department for Work and Pensions (DWP) will then start taking the tax credits repayment from your Universal Credit. There is nothing you need to do about setting this up.
You will receive more than one overpayments letter if you are repaying HMRC tax credits overpayment from more than one tax year. You must repay tax credits owed from each of these debts.
Note: Department for Communities handle overpayments of benefits and financial support in Northern Ireland.
Existing Repayment of Tax Credits Plan: HMRC Time to Pay Arrangement
HMRC NDDS existing payment plan for tax credits debt is called a ‘Time to Pay‘ arrangement. This will end after you get the overpayments letter from HMRC, no matter who your plan is with. That includes having a payment plan with an independent debt collector.
HM Revenue and Customs will also cancel any Direct Debits you have. So, you must also cancel any standing orders that you have set up to repay the tax credits debt.
Claiming Tax Credits as a Couple
Those who claim as a couple will have the debt split in half between them. Each partner receives a letter with details of their half of the debt. That means each of you are responsible for paying back tax credits for your own half share.
Note: You should contact HM Revenue and Customs if you believe your share to be inaccurate.
What if You Do Not Receive Universal Credit Any Longer?
There are cases where you might get the overpayments letter from after you stopped getting Universal Credit. In this case you must repay the Department for Work and Pensions directly.