Half a million Universal Credit and other benefit claimants have been hit by a sudden tax deduction this year.
The government has started to reclaim tax credit overpayments from as far back as 17 years ago.
The DWP revealed, following a freedom of information request, that they had been docking benefit payments to claw back the tax credit payments at a rate of 47,000 cases per week this year.
For those hit by the sudden deduction it effectively wipes out the £20 boost that was given to Universal Credit claimants at the start of the pandemic - reports Birmingham Live.
Cuts started on January 18 for people who had newly started claiming Universal Credit for the first time during the pandemic.
Many of the debts being chased are for thousands of pounds. The total amount owed in overpayment of tax credits is estimated to be £6 billion.
For those still receiving tax credits, the money is taken out of that with 10 per cent to 50 per cent of a person's payment cut to claw it back, depending on earnings.
For those only on the family element of Child Tax Credits, payments are slashed by 100 per cent, meaning income is stopped completely until the overpayments are cleared.
And for those no longer on tax credits but now on Universal Credit or other state benefits, the debt is taken from those payments. The Department for Work and Pensions can impose deductions on Universal Credit and other benefits to recover third-party debts to HMRC and other organisations.
The Government website explains that you might be overpaid tax credits if:
- there’s a change in your circumstances - even if you report the change on time
- you or the Tax Credit Office make a mistake
- you do not renew your tax credits on time
Most people will not have been aware they had received too much in tax credits.
Between April and November 2020, a whopping £63 million was taken out of claimants’ payments because they had been overpaid tax credits in the past.
HMRC’s tax credit system has identified millions of claimants who were overpaid since 2003.
Those whose payments were targeted included carers and frontline workers, The Times reported.
Only 1 per cent of tax credit overpayments are a result of fraud or negligence by the recipient. In the majority of cases, it's said to be due to system errors by the HMRC.
HMRC said that between April and December 2020 it sent 137,059 letters to warn Universal Credit claimants they would have payments cut because of tax credit overpayments from as long as 17 years ago.
A DWP spokesperson said: “We carefully balance our duty to the taxpayer to recover overpayments with our support for claimants."
