These last 12 months since getting debt advice have been a rollercoaster...
Overpayment of benefits – are you getting too much?
You’ve had a gut feeling you’ve been receiving more unemployment benefit, tax credits or council tax discounts than you may be entitled to for some time now.
The tax office mentioned something about letting them know straight away if you have a change in circumstances. But a few more pounds a week in benefits are far from ‘public enemy number one’ material, right?
If you don’t know a lot about the tax system and how it works it can be downright bewildering. You might end up thinking, “surely they won’t know I’m getting more than I should? Even if they did, what could they do about it?”
As it turns out, there’s a lot they can do about it. Don’t worry, there’s also something you can do to put things right.
What you should know
New legislation allows the Department of Work and Pensions (DWP) and local authorities to add a civil penalty to any benefit overpayments that you’re responsible for. This will apply to all DWP benefits (JSA, ESA and DLA). Local authorities can also penalise you for overpayments of council tax benefit and housing benefit.
If you didn’t tell the agency of a change in circumstances you’ll have to pay back the whole overpayment plus £50 (this isn’t the case if the overpayment is the fault of the DWP or local authority itself).
When it comes to tax credits, Her Majesty’s Revenue and Customs (HMRC) can fine you up to £3000 if they believe you wilfully claimed too much.
Why you shouldn’t blame yourself
I work full-time but also on a self-employed basis for another website. I believe I’m of average intelligence (despite anything my other half says!) but trying to understand tax-related letters is like trying to learn Swahili in a week –easier said than done!
The natural human response when dealing with things we don’t understand is to shut down, turn away and put our head in the sand. Many clients tell us this is how they’ve dealt with their debt.
It’s important that you deal with any benefit overpayments as soon as possible. It’s much better than making them contact you. Explain that you’re no tax expert but that you’re willing to come to a realistic arrangement in order to put things right.
What if they tell me I have to pay it all back in one go?
Luckily, the DWP and local authorities can be flexible when it comes to overpayments. If it would be better to pay the debt in instalments, showing the DWP a budget to support this could be enough.
If you’re on benefits, they can deduct the payments each week. It may be possible to negotiate right down to a couple of pounds if you need to budget for living costs and household bills. HMRC can also be lenient when an innocent mistake has been made, especially if it’s a first time claim.
I was claiming single person’s discount on my council tax but now my partner’s moved in/my child has turned 18 – what should I do?
Your council tax is a priority bill, and penalties can be severe if you wilfully avoid payment. Telling the council about your change in circumstances might encourage them to work something out with you. This is something we strongly advise, as it can be difficult to negotiate reduced payments with a bailiff.
It’s tempting to not tell the council that a new partner now lives with you, but we strongly advise against this. All it takes is one phone call from a nosy neighbour to land you in hot water.
When a child in your household turns 18 and they’re no longer in education, the chances are you will no longer be entitled to this discount. The council usually writes to you to let you know, but this isn’t guaranteed. Check with them to make sure where you stand – letting it lie could result in a hefty overpayment debt.
There’s more useful information on how to deal with overpayment on the Advice Now website.
You can also check to see if you’re claiming all the benefits you’re entitled to by using our online benefits checker.
What else can you do to help me?
While we can’t negotiate directly with the DWP or your local council we can help you put a budget together that supports an offer of payment you are making. Most local councils know us and refer people to us. We’ll help to prioritise these important bills and look at areas in your budget that can be reduced.
If you have unsecured debts such as loans, credit cards and store cards, we can help you adjust your payments to these so you can pay more to the overpayment debts. Your creditors also know us and should meet you halfway until things improve.
If you’ve been lumbered with an unexpected overpayment bill you don’t need to suffer alone. Use Debt Remedy, our anonymous online debt advice tool.
For more details on the changes in welfare, read our benefit changes section.
07 Nov 2012
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