Half a million claimants of Universal Credit are shocked by sudden tax deductions.
These Universal Credit and other benefits deductions arose from 17 years of overpaid tax credits.
The government has been claiming back since January 18 this year for people who first started claiming Universal Credit in the pandemic.
according to BirminghamLive, the DWP has withheld payments this year to recover overpaid tax credits, at the rate of 47,000 cases per week.
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For those who still receive tax credits, the money is taken out of it with 10 to 50 percent of one’s payment to reclaim it, depending on the income.
For those who only have the family element of child tax credits, payments are reduced by 100 percent, meaning income is stopped completely until the overpayments are settled.
And for those who no longer have tax credits but now have Universal Credit or other state benefits, the debt is deducted from those payments.
The Department for Work and Pensions may impose deductions from Universal Credit and other benefits to collect third-party debt owed to HMRC and other organizations.
The government website explains that you may receive too many tax credits if:
- there is a change in your circumstances – even if you pass on the change in time
- you or the tax authorities make a mistake
- you do not renew your tax credits on time
“If you’re still getting a tax credit or getting Universal Credit now, the money you owe is usually written off from your future payments,” the government says.
Most people would not have known that they had received too many tax credits.
Between April and November 2020, as much as £63 million was withheld from claimants’ payments for having received too many tax credits in the past.
HMRC’s tax credit system has identified millions of claimants who have overpaid since 2003.
Those whose payments were targeted included carers and frontline workers, That reports The Times.
Only 1 percent of overpaid tax credits are the result of fraud or negligence on the part of the recipient. In most cases this would be due to system errors by the HMRC.
HMRC said it sent out 137,059 letters between April and December 2020 warning Universal Credit applicants that their payments would be cut due to overpaid tax credits from 17 years ago.
Alistair Cromwell, acting chief executive at Citizens Advice, told The Sun: “Deductions, especially when they come out of the blue, can make it very difficult for people with Universal Credit to manage their money.
“A more flexible approach is needed so that people are not able to cover their essential bills through deductions.
‘If you’ve been hit by overpayment and you’re struggling, your local Citizens Advice can help you with free financial advice.’
A DWP spokesperson said: “We are carefully balancing our duty to taxpayers to recover overpayments with our support of plaintiffs.”
Peter Tutton, head of policy at the charity StepChange, said: “Almost one in five of our government-indebted customers have overpaid tax debt.
“Often, deductions are imposed to repay this debt without regard for affordability, and in ways that surprise people because of poor communication.
“In a recent survey, nearly all (93 percent) of StepChange’s customers who experienced deductions had experienced financial difficulties or difficulties as a result.
“This is part of a wider problem of bad public debt management practices where standards need to be improved quickly.”
Benefits advice website EntitledTo says claimants can challenge the decision.
A spokesperson said: “Unfortunately, tax credits always came with the risk of over or underpayment, but decisions can also be challenged or challenged if they are wrong.
“Anyone can challenge HRMC’s decision if they have received a letter of formal notice and don’t think they have to pay anything back.
“There are deadlines to follow, though, so get in touch quickly to ask what the blame is for. Then ask how you can challenge the decision if you’re not happy with the answer.”