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Overpayment of Tax Credits – What to Do

Overpayment of Tax Credits – What to Do

Do you think that you’ve had an overpayment of tax credits? If so, you could be eligible to make a cancellation on the overpayment or minimise what you need to pay. This can be done by reaching out to a member of the tax credit office at HM Revenue and Customs (HMRC).

HMRC might think that you’ve been overpaid if they make the mistake of gathering incorrect information about you and your circumstances. To find out more about tax credit overpayments and how to deal with them, continue reading.


What Are Tax Credit Overpayments?

What is a tax credit overpayment? Essentially, a tax credit overpayment is when a claimant has received more working tax credit or child tax credit than the end-of-year calculations would award them. These calculations are completed by HMRC.

So, if you’ve received more tax credit entitlement or been given a payment to which you weren’t entitled, you’ll have an overpayment of tax credits.

Typically, overpayments occur when you give incorrect information while making or renewing a tax credit claim, fail to notify of any changes in circumstances to the tax credits system, don’t report increases in your income, and don’t renew your tax credits on time.

Tax credit overpayments can also happen when HMRC makes errors. In the best-case scenario, HMRC will make it clear as to why they think you’ve had an overpayment of tax credits. Usually, HMRC will inform you of why you’ve had an overpayment via post sent to your address.

If you’ve made efforts to find out why you’ve been overpaid and still don’t know, we recommend getting in touch with the tax credits helpline.

It’s important to take note of any vital information provided during your phone call with the tax credit helpline; politely ask for the call handler’s name and make a note of the date and time that you were on the phone. This information could help in the near future if you need details from your phone call while challenging an overpayment.


Have You Been Overpaid?

If you suspect that you’ve been overpaid tax credits, you’ll need to contact HMRC. Before doing so, ensure that your claim is true; have you been overpaid, or is this actually what you’re entitled to? If you’re certain that you’re eligible for the tax credit overpayment you’ve received, it could be worth letting them know.

For them to look at the decision again in detail, it’ll be considered a mandatory reconsideration. Once you’ve agreed with HMRC whether or not you’ve been overpaid tax credits, the next step is to simply wait.

If you’ve made your statements clear and have enough evidence to prove you’ve been overpaid by mistake, the situation should be left in the hands of HMRC. For some, it can cause worry knowing that you’ve been overpaid in tax credits, especially if you’re unsure why.

Knowing you might need to dispute with HMRC about why you’ve been overpaid and how you’ll give it back to them can be quite stressful. However, HMRC does often make mistakes, and you shouldn’t let the process take too much of a toll on you.


Paying Overpaid Tax Credits to HMRC

If you’re required to repay your overpaid tax credits, it typically comes down to whether the tax credit payments were a mistake on behalf of HMRC. If the mistake was made by HMRC, the likelihood of them requesting that you recover the money is unlikely, although this isn’t certain.

You can ask HMRC to reduce your overpayment if they haven’t done the following:

  • Give you the right advice after you’ve provided them with sufficient information.
  • Paid you the correct amount.
  • Correct any mistakes that you’ve told them about.
  • Correctly recorded any information given by you.
  • Confirmed in writing how many tax credits you’ll get in the next 30 days of you informing them about a change in circumstances.


Opening a Dispute With HMRC

If you believe that HMRC made a mistake or gave you the wrong advice, which later led to an overpayment, you can open a dispute for recovery of the overpayment. However, in some cases, HMRC’s mistake won’t be the reason for your overpayments.

A dispute can be opened with HMRC even if their overpayment wasn’t a mistake. If you were in a position where you were seriously ill or suffering from bad health in general, HMRC could consider your circumstances and look into the situation further for you.

If you don’t have a specific reason to dispute with HMRC, you’ll still be able to appeal. Many people who are in tax credit debt from HMRC can ask for ongoing tax credit payments to be split into instalments as opposed to being given in one lump sum.

No matter your job role, whether you work in construction, hospitality or are self-employed, a tax credit overpayment must be dealt with promptly. Typically, HMRC will deduct the tax credits that you owe from your payments, meaning fewer tax credits will be given to you until you’ve paid your tax credit debts off.


How LJS Accounting Services Can Help

Whether you’re having trouble regarding tax credit overpayments or just simply require some advice, LJS Accounting Services can help. With 12 years of experience behind us, our team offers a range of professional tax services for you to utilise.

We can help you navigate the world of tax, including tax credit overpayments. Our knowledge and expertise are second to none, and our hard-working and dedicated team of specialists has assisted clients across the UK with all aspects of tax.

We can inform you on how much tax credits you should receive as well as how to make a new tax credit claim. If you’re having trouble with HMRC and are being requested to make tax credit payments, we encourage our HMRC investigation services.

If you require any additional information about our tax services, please don’t hesitate to get in touch. We look forward to hearing from you in the near future. 

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