Q: HMRC has just contacted me to say that I owe them money as they have overpaid my Tax Credits. I didn’t realise that this could happen, and I don’t have enough money set aside to pay them back. What should I do?
A: Tax Credits are designed to give working people a little bit of extra income to help guarantee a decent standard of living from work.
Unfortunately, the system by which entitlement to Tax Credits is decided is complicated and can often lead to people falling into debt when they are asked to repay money they’ve wrongly been given by HMRC.
Tax Credits are gradually being phased into the Government’s new Universal Credit system, which is intended to reduce credit miscalculations and overpayments.
However, whilst we wait for the system to change, problems with the current process seem to be getting worse. Last year, Citizens Advice across England and Wales saw a 14 per cent increase in problems relating to debt caused by Tax Credit overpayments.
The combination of pressures on people’s living costs means that being asked to repay Tax Credits at the end of the year can be a real blow. Sky-high energy bills, expensive childcare and wages which are still failing to keep up with costs mean that it can be a real struggle for households make ends meet. The last thing hard-pressed households need is for HMRC to put them in more debt.
Often, HMRC will be willing to work with you to see what you can afford to pay back, but in many cases, poor communication and delays by the agency have led to our clients struggling to get a fair outcome.
If you’re struggling with debt then it’s important to take steps to get on top of your bills. Debt can seem impossible but there’s always a way out of problems.
If you come to us, we will be able to work out a debt management plan with free and impartial advice.
'Copyright Citizens Advice. For further information visit www.cardiffandvalecab.org.uk