Overpayments which are being recovered from an on-going award

The level of deduction from on-going awards is set out in Code of Practice 26. These are:

• 10% if you are in receipt of a state benefit such as JSA
• 100% if you only receive the family element of child tax credit
• 25% in all other cases (usually these are ‘working households’)

For example, Sarah Smith gets £1000 tax credits per year and so an overpayment repayment at 25% would mean that £250 a year of this £1000 would be paid towards the overpayment, leaving £750 for Sarah.  Code of Practice 26, the code of practice on recovering tax credits , can be found at http://www.hmrc.gov.uk/leaflets/cop26.pdf

If you think the level of deduction from your award is wrong, you should contact the Tax Credit Office (on 0345 300 3900) and explain why. Even when the recovery rate being used is in line with the percentages shown, you may ask HMRC to reduce the recovery percentage rate if you are experiencing financial hardship.

Remember that if your claim ends or is interrupted then you will be sent a bill for any remaining overpayment. It is possible to negotiate time to pay the bill. (Your claim might end, for example, because you are no-longer entitled to tax credits because you have stopped working or your youngest child has left home; or because your claim has lapsed because it was not renewed on time; or because you are no longer part of a couple, or have become a couple but used to claim as a single person).

Negotiating time to pay the bill is discussed in the next section.

If you think that the actual overpayment is incorrect (rather than just the rate of collection), or that HMRC has made a mistake you have some additional options (see section 3 of this guide).