800,000 households claiming Universal Credit hit by benefit sanctions

30 August 2023 , 08:36

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Around a third of all households claiming Tax Credits have been overpaid (Image: Getty Images/iStockphoto)

More than 800,000 people on Universal Credit were hit with benefit deductions last year because they were overpaid Tax Credits, according to a new BBC report.

It is claimed 80,000 households owe £5,000 or more - and in some cases, benefit recipients were only made aware they owed money when they were moved over to Universal Credit. Tax Credits are slowly being replaced by Universal Credit, with 1.5million people being moved over to the newer benefit.

Around a third of all households claiming Tax Credits will be overpaid, according to Government data, and therefore will owe money back to HMRC. Tax Credit households can see their monthly benefit deducted by up to 25% if they are in work, or by up to 15% for those not in work. HMRC data shows 13% of people will be underpaid.

Tax Credit awards are calculated across the 12-month financial year and HMRC told The Mirror households are required to let it know of any change in circumstances. However, debt advisors told the BBC “this can be hard for people on zero-hours contracts, those with disabilities or mental health issues, and others who do not speak English as a first language”. Tax Credit awards can also be wrongly calculated by the system, campaigners said.

A Government spokesperson said: “We have well-established processes to help individuals manage repayment of tax credit debt, and we’re committed to supporting those who are struggling with repayments. Universal Credit deductions help protect claimants from enforcement actions such as eviction, ensure priority debts such as child maintenance are paid, and recover taxpayers’ money when overpayments are made.

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“But we recognise the pressures of the rising cost of living which is why the Government is bearing down on inflation and providing record financial support worth an average £3,300 per household.”

What to do if you're struggling

If you're struggling to repay Tax Credit overpayments, make sure you seek free debt advice as soon as possible from organisations such as Citizens Advice and Turn2Us. If you're still claiming Tax Credits, speak to HMRC to see what help they can offer you. If you are now on Universal Credit, you can contact the debt management team at the DWP to ask for support.

Ultimately, the type of help you may be offered all depends on your individual circumstances. Turn2Us says you may be able to "ask HMRC not to recover some or all of the overpayment if recovery would cause you hardship or you have other special difficulties, such as mental illness, illness or disability".

It continues: "You may be able to negotiate a suspension of recovery, reduction of the amount to be recovered or for the overpayment to be written off." You can make a complaint if you are unable to reach an agreement on how the debt should be recovered - see more information on the GOV.UK website.

Levi Winchester