Welfare Tax Credits: Overpayments
(asked on 11th May 2021) - View Source
Question to the Department for Work and Pensions:
To ask Her Majesty's Government how much it would cost to write-off overpayment tax credit debt accrued by Universal Credit claimants (1) in total, and (2) for the time periods of (a) 12 months and under, (b) 12 months to under 36 months, (c) 36 months and above; and in each case how many claimants would have their overpayment tax credit debt written off.
The Department for Work and Pensions (DWP) does not store information in a format entirely commensurate with the question, but I can confirm that approximately £3 billion Tax Credit debt associated to Universal Credit claimants has been transferred to DWP. This debt relates to 2.4 million claimants, some of whom could appear more than once in this total. The following table breaks this down and shows how much has been recovered to date.
Tax Credit debt transferred to date
Financial Year | Customer Count | Values | Total Recoveries |
2016-17 | 110.8k | £147.933m | £6.261m |
2017-18 | 155.8k | £190.472m | £37.987m |
2018-19 | 531.3k | £676.984m | £109.091m |
2019-20 | 724.5k | £964.170m | £213.693m |
2020-21 | 593.0k | £679.055m | £206.041m |
2021-22 YTD | 285.4k | £364.141m | £61.838m |
Totals | 2400.8k | £3,022.76m | £634.910m |
During the same period, the Department wrote off £9.4 million Tax Credit debt for approximately 5,700 customers. The latest HMRC forecasts suggest that a further £2.4 billion is due to migrate to DWP Debt Management for future recovery. Therefore, based on the value of debt transferred to date and the forecast of further debt that will transfer, if all Tax Credits debt associated to UC claimants was written off it would cost in the region of £5.4 billion associated to approximately 4 million customers.
The Department has a duty to protect public funds and an obligation to ensure that overpaid benefit payments are recovered in accordance with the appropriate social security legislation.
The Department seeks to recover benefit overpayments as quickly as possible without creating any undue financial hardship to the claimant. The rate of deduction is determined by legislation and can only be calculated once other higher priority deductions have been taken into account. The maximum deduction that can be taken from someone’s UC Standard Allowance was reduced to 25 per cent in April 2021.
We want to ensure that repayment of all debt owed to the Department is sustainable and takes into account the customer’s ability to pay. Claimants are encouraged to contact DWP if they are unable to afford the rate of recovery. The recovery rate of Tax Credit overpayments can be reduced where a claimant is experiencing financial hardship.