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Benefit and tax credit overpayments

An overpayment letter can be a shock. You can question the decision, and you can ask for repayments you can actually afford.

Applies to: England & Wales

Written by The My Debt Cleared editorial teamLast reviewed 18 October 2026Next review 18 April 2027Jurisdiction England & WalesEditorial policy
If DWP says you were overpaid, it usually recovers the money by reducing your ongoing benefits. If you no longer claim, DWP Debt Management will ask you to repay and can take money from wages without going to court. Since June 2026 it also has new powers to recover from bank accounts. You can ask for a mandatory reconsideration, usually within one month, and ask for lower repayments.

What to do now

  1. Check the decision letter. If you think it is wrong, ask for a mandatory reconsideration, usually within one month.
  2. If repayments are too high, call DWP Debt Management on 0800 916 0647 and offer what you can afford.
  3. Get free advice straight away if you are accused of fraud.

What an overpayment is

An overpayment is benefit you were paid but were not entitled to, perhaps because a change was reported late, or because of an official error. You can usually be asked to repay either way. Overpayments of Universal Credit can be recovered even when the mistake was DWP’s. Housing Benefit overpayments are usually recovered by the council.

Is it a priority debt?

It is not like rent or council tax, because you will not lose your home over it. But DWP can recover money without a court order in several ways, so treat it seriously and deal with it early.

How DWP recovers overpayments

  • From your benefits. Your payments are reduced until the overpayment is repaid. For Universal Credit, total deductions are usually capped at 15% of your standard allowance, though some deductions for rent, energy and child maintenance can go above this.
  • From your wages. A direct earnings attachment tells your employer to deduct an amount from your pay. No court order is needed.
  • Debt collectors and court. DWP can pass the debt to a collector or to its Debt Enforcement Team, which can seek a county court judgment.
  • From your bank account. New powers that came into force on 24 June 2026 let DWP take money directly from bank accounts without a court order, for people who no longer claim benefits and do not engage. DWP says enforcement is being rolled out gradually from October 2026, and in the most serious cases it can ask a court to suspend a driving licence.

Tax credit overpayments

Tax credits ended on 5 April 2025, but overpayments are still collected. If you get Universal Credit, the overpayment is taken from your Universal Credit payments. If you do not, you pay HMRC directly. If you think HMRC has got it wrong, or you cannot afford the repayments, contact HMRC’s tax credits helpline.

What you can do

  1. Check the decision. Ask how the figure was worked out and whether it is recoverable. You can ask for a mandatory reconsideration, then appeal.
  2. Ask for a lower rate. If deductions leave you short for essentials, explain your budget to DWP Debt Management. Write-off is rare but possible where recovery would cause serious hardship.
  3. Fraud allegations. Get specialist benefits advice before you answer questions.

Formal solutions

Overpayments not caused by fraud can usually be included in a DRO or bankruptcy, and DWP should not then continue recovering them by deductions; they can also go in an IVA. Debts from fraud are not written off by bankruptcy or a DRO. A free adviser can check how your overpayment would be treated.

You can get free, impartial debt advice

You never have to pay for debt advice. MoneyHelper (government-backed), StepChange, National Debtline and Citizens Advice all give free, confidential advice with no obligation.

Common questions

Can DWP take money from my wages for an overpayment?

Yes. DWP can use a direct earnings attachment to take money from your pay through your employer without a court order. Contact DWP Debt Management to agree an affordable plan.

Can DWP take money from my bank account?

New powers in force from 24 June 2026 allow DWP to recover from bank accounts without a court order for some people who no longer claim benefits and do not engage, with enforcement rolled out from October 2026.

Can a benefit overpayment be included in a DRO?

Usually yes, unless it was caused by fraud. Fraud debts are not written off by a DRO or bankruptcy. Check with a free adviser before applying.

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