Tax credits Tax credit overpayments

Overpayments can be a problem with tax credits

Tax credits have helped thousands of families, but the system is not without its problems.

One of the biggest problems for people is to do with overpayments. This is where you receive more tax credits that you are entitled to and HMRC demand the overpayment is repaid.

The problem is that it's very difficult for people to accurately check their award, so most people can't check if they are being paid too much. Because of this many overpayments have to be repaid one way or another.

Why a tax credits overpayment might be made

Overpayments might happen if:

• You don't give the right information when you first claim or when you renew your claim at the end of the year
• You're late telling HMRC about a change in your circumstances or a significant increase in your income
• You give the wrong information when you tell HMRC about a change in your circumstances
• HMRC makes a mistake when processing your tax credit award
• HMRC doesn't act on information you have given them

Challenging a tax credit overpayment

If you don't agree that you should pay back an overpayment, then you can challenge this. This is called a dispute. If you think the amount of the overpayment is wrong because HMRC have calculated your tax credits incorrectly, then you should appeal using form WTC/AP.

You can ask HMRC to look at your tax credit award again. HMRC call this disputing an overpayment.

If you are disputing your overpayment for other reasons you can either use form TC846 – Tax credits overpayments or you can write to the tax credit office giving them all your details and telling them why you think you shouldn't have to pay back an overpayment.

HMRC code of practice

HMRC have a code of practice that they must abide by when dealing with overpayments. This is called COP26 What happens if we have paid you too much tax credits?

If you have been told that you have been overpaid and are being asked to repay this, make sure you get hold of a copy of COP26, so you know your rights.

You may also be able to get help from TaxAid or from the Low Incomes Tax Reform Group.

More on this...

• For any tax query, call our experts on the Which? Money Helpline 
• Try the Which? Tax Calculator
• Tax problem? Take a look at our guide to tax appeals, disputes and complaints