Priority or Non-Priority: Benefit Overpayment

Benefit overpayments

Getting a letter saying you have been overpaid benefits can be worrying, especially if it was not your fault. Whether it is a Department for Work and Pensions (DWP) overpayment, a council tax benefit overpayment, or a tax credit overpayment, it is important to understand your rights and get advice early.

Benefit overpayments are usually treated as a priority debt because the authorities can take enforcement action that reduces your current and future income. This can lead to a shortfall in your benefits, which may cause you to fall behind on rent or other essential bills.

Council tax benefit overpayment

If you have been overpaid council tax support, this may be treated as council tax arrears. This has serious implications, including:

• Recovery through an enforcement agent (bailiff)
• Deductions from your benefits
• In some cases, your council can apply for bankruptcy, typically if you own a home and/or the council tax debt is more than £5,000

However, debts caused by fraud are not eligible debts for bankruptcy and cannot be written off this way.

If fraud is suspected

If the authorities suspect dishonesty, they may carry out a formal investigation, which could result in prosecution for benefit fraud. If you are facing a fraud investigation, you should get legal advice as soon as possible.

If fraud is found, you may be prosecuted, imprisoned, and/or fined.

You can find a solicitor through the Law Society's Find a Solicitor service.

If you accept the overpayment decision

If you accept that there has been an overpayment, the DWP will recover the money. Deductions from your benefits will begin automatically. This debt is treated as a priority.

How the DWP recovers overpayments

The DWP recovers benefit overpayments primarily through automated deductions from ongoing benefits (typically 15%-25% of your payment, up to a maximum of 40% of the standard allowance), direct earnings attachments (deductions from your wages), or repayment plans. If the debt is not repaid, it may be pursued through court action, such as a County Court Judgment (CCJ).

1. Notification

You will receive a letter detailing the overpayment amount, the reason for it, and how to repay.

2. Methods of recovery

• Ongoing benefits: Deductions are made directly from payments like Universal Credit
• Wage deduction: A "direct earnings attachment" can be sent to your employer
• Cash repayments: If you are not on benefits, you will be asked to set up a payment plan

3. Disputing the debt

If you believe the overpayment decision is wrong, you can ask them to look at the decision again (this is called a Mandatory Reconsideration) within one month of the decision letter. Recovery is suspended while the reconsideration is being looked at. If you still disagree after that, you can appeal.

4. Hardship provisions

If the repayment rate is causing you financial hardship, you can request a reduction in the deduction amount.

5. Time limit

The DWP generally has six years to recover the debt.

If you have received an overpayment letter, get in touch. We can help you understand your options.

Get help

• Email us at info@youthlegal.org.uk
• Call us on 020 3195 1906
• Fill in our contact form and we'll get back to you

All our advice is free and confidential. You can also check your options at Citizens Advice or GOV.UK benefit overpayments.