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Overcoming issues with tax credit overpayments

Sharon McDougall - Updated - 7th August 2023 - 3 minutes to read

Tax credits are designed to help individuals and families top up their incomes when they are finding it difficult to pay for essential everyday expenses based on their ordinary incomes. The credits are distributed through official government-approved channels in Scotland and the rest of the UK.

For the most part, these credits are received only by people who are entitled to them based on official criteria. Unfortunately, however, there are instances in which overpayments are made and wrongly received and this can lead to a person or a family having to pay thousands of pounds back to the government.

Why might I have to repay tax credits?

There are generally three reasons why the government will insist of having you repay tax credits and they are as follows:

–          Your financial circumstances changed but you failed to inform the Tax Credit Office

–          You submitted incorrect information on your tax credit forms

–          You didn’t renew your tax credits before July 31st

It is worth noting that your tax credits need to be renewed before July 31st in each year that you claim them, even if you are not planning to claim them thereafter. Failing to renew your credits can result in demands for repayment even where there is no dispute over your prior eligibility.

What can I do if worried about tax credit overpayments?

The first thing to do if you’re concerned that you may have to repay tax credits is seek clarification as to why this might be the case and how much money may be involved. This will mean calling the Tax Credit Office to make the relevant enquiries.

If it is decided that you will need to repay council tax credits you’ve been paid in the past then there is scope for you to appeal that decision but you’ll have to submit the relevant forms quickly and provide as much detail as possible.

If your appeal fails then you will be left with little choice but to find a way of repaying the money being demanded of you in full over a period of time.

How can I establish a repayment plan?

What is crucial, if you’re struggling with tax credit overpayment debts, is to communicate your concerns and to ask that a fair repayment plan be established so you can settle the debt. If you ignore the issue or hope that you might be able to convince the relevant parties that you shouldn’t be repaying the overpayments then matters can soon be made much worse.

Once your appeal in this context has been rejected, for whatever reason, it will officially be regarded as debt that you are liable for so it is very important to show that you are willing to address the issue from that basis. You won’t be obliged to pay the full amount immediately and your repayments can generally be spread over a period of months or years.

What you must aim to do, though, is stick with the terms of any deal you’ve agreed so the government has no reason to instruct debt collectors or bailiffs in relation to your tax credit issues.

Consider all your options

Tax credits are designed to offer a measure of support to people whose financial position entails limited flexibility and few options. It is therefore an unfortunate inevitability that people who find themselves having to repay tax credits paid to them in error will often be unable or will struggle to settle the resulting arrears.

If tax credit repayment demands have added to your debt management difficulties and you’d like to know more about what your options are then call Scotland Debt Solutions to speak to one of our experts in confidence.

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Sharon McDougall


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