Tax Credits: Challenging overpayments
Although tax credits ended on 5 April 2025 and there are no live tax credit awards after that date, HMRC will continue to deal with tax credit matters, including issues relating to tax credit overpayments. It should be noted though that once HMRC have transferred a tax credit overpayment debt to DWP for recovery, issues relating to the recovery (including hardship) should be directed to DWP and only issues relating to the cause of the overpayment (including explanations) or challenging whether it should be recovered should be directed to HMRC.
Most advisers who deal with tax credits are likely to have dealt with a claimant who has been overpaid. The nature of the tax credits system means that overpayments are a natural part of it and can arise without fault by either the claimant or HMRC. However, some overpayments occur as a result of an error by HMRC or a mistake by the claimant.
There are six options that must be considered when challenging an overpayment. The options are not mutually exclusive, therefore it may be appropriate to pursue one, two, three or all of them, depending on the circumstances of each case.
If a claimant does not understand why they have an overpayment – they should contact HMRC’s tax credit helpline. An explanation may be given over the phone. In some cases, claimants may need to write to HMRC for a fuller explanation and may need to consider a subject access request. It should be noted that HMRC will not suspend recovery of a debt when a claimant asks for more information/an explanation. Recovery is only suspended when a mandatory reconsideration is lodged (or a subsequent appeal made to the First-tier Tribunal).
The options to challenge an overpayment are:
Last reviewed/updated 11 May 2025