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The tax credit is the amount of money that the taxpayers can subtract from taxes that they owe to the Government. Basically, Tax credits reduce the amount of the tax that one owes. And the tax credits overpayments take place if the person gets more tax credits than he/she should have received in a particular tax year (Tax year is considered from April 6th to next year’s April 5th).

At the end of the tax year, HMRC (Her Majesty’s Revenue and Customs) checks if one has paid the correct amount in that particular year. If anyone pays more than he/she should pay, tax credits overpayment will be charged against him.  

About HMRC

HMRC mainly deals with the tax credits but most of the letters (related to tax credits) are sent from the Tax Credit Office. They are just a part of the HMRC which mainly delivers decisions about one’s tax credits. 

If you are facing any problem related to the tax credit, you have to first write to the Tax credit Office and share your inquiries. They are the ones who make the decisions regarding the overpayments. 

How to know if He/She has Overpaid?

You will get a letter from the HMRC if you overpay the tax credits. Or if you notice that the tax credits payments are going down, then it signifies that you have overpaid.

Sometimes, HMRC gives you tax credit rewards for overpaying the tax credits. In that letter, there will be the name of the taxpayers, address and the amount of the tax credits that are already paid. And in the “amount due from your” section, the data regarding overpayments are shown. 

Reasons for Overpaying Tax Credits

Tax credits are designed in such a way that the taxpayers have to first payout the amount and then only he can check the amount that he had paid. 

And once the tax year will end, HMRC will send you the details to give you the exact income and other required details. You have to confirm the details by sending back the letter that they have sent. 

Only then you can check if you have overpaid the tax credits or not. In certain cases, a person can overpay if his income increases. Sometimes, for not returning the form to HMRC, it can lead to the overpayment of the credits. 

  • Besides, if HMRC fails to act as per your request, it will lead to the overpayment of tax credits.
  • HMRC can make mistakes at the time of putting the amount of the tax credits. This kind of mistake is mainly regarded as the official error. 
  • One can overpay the credit tax if HMRC does not send the form to the taxpayers.
  • For providing the wrong details in the award notice, the taxpayers have to overpay. 
  • Sometimes, the taxpayers fail to make the payment of the debt on time. 

If you don’t know how to avoid such situations, you should take the help of the advisers. The taxpayers can write a letter to HMRC stating their queries. If you don’t get tax credits, in that case, the taxpayers have to pay the debt to HMRC. 

Before Contacting HMRC 

Before Contacting the HMRC, one has to understand certain aspects and information regarding:

  • The reference number (the reference number consist of 10 digit Unique Taxpayer Reference for VAT reference number).
  • You have to mention the amount of the tax bill which is hard for you to pay. Mention the reason why you are unable to pay that amount. 
  • How far you have gone to pay back the bill.
  • What amount of money you will be able to pay right now. And how much time you require to pay the rest of the money. 
  • The bank details of the taxpayer. 

What Happens Next?

After contacting the HMRC, you will be asked certain basic information. This information will be about :

  • The income and expenditure rate.
  • The assets that you own and detailed information about the investment. 
  • What the taxpayers are doing to get the tax payments.

HMRC will next think about whether you are eligible to pay the money immediately. If you fail to do so, the members of HMRC will decide whether you can pay the money within the additional time frame. 

Consequences for not Paying to HMRC

After getting the “notice to pay” letter, the individuals have to reply to the letter within 30 days. And if you need additional time to repay, you have to write a letter to HMRC to do that. 

What if the Taxpayers can’t afford the repayments? 

The taxpayers who are unable to pay within the given time period and need extra time for the financial difficulty can ask HMRC to provide that. At that time, HMRC will ask about a few detailed information:

  • Details regarding the savings and income will be asked which includes the benefits and pensions. 
  • A person has to share his living expenses including rent, mortgage, and childcare payments.
  • He has to mention if any other repayment is due including the loans, credit card, and utility bill repayments. 

HMRC will take action against you, in case even after taking the extra time, you fail to pay the tax credit debt. In that case, the advisers will put up the Enforcement Action against the taxpayer. They will seek help from the debt collection agency to clear all the dues. 

If HMRC fails to take the money that one owes, the debt will be passed to the Department for Work and Pension. When such a situation occurs, the taxpayers will receive the TC1131 Letter. 

Department for Work and Pensions

The Department for Work and Pensions helps the user to recover from financial difficulties. By doing this they help the taxpayers to pay the remaining debts. They follow a simple process following which they pave the way to pay back the money. 

  • They reduce other benefits.
  • Agrees with the repayment with the taxpayers.
  • Asks the employers to get the money from one’s earnings.
  • Asks for a debt collection agency to take out the money that one owes. 

Details that Needs to be Checked

When HMRC will send you the letter, you have to provide them with the required information. And the information will be related to:

  • The Number of National Insurance that one has applied for. If you have a joint claim, you have to mention that also.
  • Numbers of hours one works in his or her workplace. 
  • The total amount of income based on the current and the last year.
  • If anyone owes a joint claim, they have to share both the details as mentioned in the award notice.
  • The number of children one has and where they stand based on the disability rate of the child tax credit.
  • Income-based jobseeker’s allowance and income-related employment are also there in the form. 
  • Qualification under the disabled category and childcare costs. The highest rate of allowance of a person.
  • Disability Living Allowance of a child or person with a higher care rate and details related to Personal Independence Payment of a person which is enhancing his living. 
  • Payments will be listed in the form, and you have to check the details if the current and past year of your income is given correctly. 

Ways of Paying back tax credits in Installments

If you overpay tax credit debts, the tax credit office will send a letter to you regarding what you owe and the amount of money that has to be repaid. Now, how you will repay the total amount depends on whether you still get the tax credits, universal credit or neither of these two.

And you have to write a letter to HMRC if you think that the Tax Credit Office has committed a mistake. Or if the taxpayers repay the amount but still get letters, they have to set up a new plan to avoid getting further letters.  

In case you are still getting tax credits

HMRC will reduce the amount of money from the future tax credit payments if you pay the remaining owed money. And the number of reductions depend on one’s income and how much you spend in a household. 

  • If you earn £20,000 or less, you will get a maximum 10% reduction on the tax credits. 
  • The taxpayer who has £20,000 or less household income and gets less than maximum tax credits and will get a 25% reduction.
  • And if the household income is more than £20,000, they will get up to 50% tax credit reduction. 
  • If the family avail the Child Tax credit, he will get a 100% reduction on the payments, no matter how much he earns. 

Avail the Universal Credit

If a person has the universal credit, then all the future payments will be reduced if you avoid all the due payments. When you will start getting the universal debt, you will get another letter from the HMRC stating the amount of money that one owes. The taxpayers will get the letter after one month of availing the universal credit. 

For the Existing Payment plan

If you have an existing repayment plan, it will no longer endure after you receive the tax credit debts. And this plan is only applicable for the independent debt collectors. If you are not getting any letter from HMRC regarding the Universal Credit, in that case, you have to repay the DWP directly. 

Benefits of Overpayments

How one will pay the overpayment totally depends on whether they are getting any benefits out of it or not.  

How to Repay the Money from the Benefits

If a taxpayer is getting benefits, the regular amount of paying the tax credit will be reduced in that case. And to reduce the money, they have to contact the DWP and they can even tell the DWP if he thinks the amount of money is more than one can afford. 

Ways to Pay Tax Credits

There are also other ways through which one can pay the tax credit debts. Applying those methods, one can collect the tax debts from the taxpayers. 

  • If the taxpayers are getting a minimum amount of the tax credit, he doesn’t have to further payback.
  • They can even pay on the basis of monthly instalments. 
  • It will be easier for HMRC to take out the money from the benefits. Or they can even pass the debt to the debt collection agencies. 
  • HMRC can take the help of the bailiffs to collect the debt from the taxpayers.
  • And, if you don’t pay back the money, they can even take you to court to get a clear judgment. 

What Will Happen if Anyone disagrees with the Overpayments?

The taxpayers might not agree with the terms and regulations of HMRC, in that case, they can directly approach them through their helpline number. They can even return back the tax credit overpayment form TC846. The user can re-run the TC846 form within the 3 months of getting the letter from HMRC.

About the TC846 Form (Tax Credits overpayment form)

The taxpayers can use this form if he thinks that he has fulfilled all the requirements of paying back the tax credit overpayment. The people who took more time to repay, can’t use this form. 

Information Required

In the tax credit overpayment form, the taxpayers have to provide a few necessary information. As a taxpayer, they have to provide the correct information to avoid any negative impact.

  • The taxpayers have to give accurate up to date information in the form.
  • They have to state about the changed circumstance as well.
  • As a taxpayer, they have to check out the information that is mentioned in the award notice. If they find anything illegal, missing or incomplete they have to write a letter regarding that.
  • Besides, they have to check the payment details that are mentioned. 

The taxpayers have to provide his first name, surname, national insurance number details in the TC846 form. And for the disputed overpayment cases, the taxpayers have to answer about the tax year or time period of the overpayment. If the person has contacted the HMRC about the disputed overpayment issues, then it requires clarification. You can even state whether the HMRC made any mistake or not. In this section, users have to provide further information about the address, phone number, about the day that the taxpayers will be available. 

When do payments have to be made?

In some cases, one can get the paid money back, though they are rare still, there is a chance of its occurrence.

  • If the taxpayer has given the wrong information.
  • If you have not reported the circumstance changes to HMRC. 
  • Taxpayers sometimes fail to make the payment correctly. 

Repay When Someone Dies

If someone dies DWP recovers the overpayment from the person’s estate. The overpayment plan will get cancelled. 

If the taxpayer fails to Pay on Time

The taxpayers have to first generate the HM revenue if he fails to pay within time. They will be sent a setup payment plan to pay in instalments. To set the payment, the taxpayers need to have a Government Gateway user ID and password. And if anyone doesn’t have an account on the Government website, they have to create one to set up the plan.  

How to Setup the Self Assessment Payment Plan

The payment plan helps the tax charges to pay the tax charges for a couple more months. The plan covers the amount that the taxpayer’s current and upcoming amount that he has to pay. The Taxpayer has to keep on updating the amounts that he is going to pay. 


To set up an online payment plan, one needs to meet certain criteria. These criteria include:

  • His income should be £10,000 or less than that. 
  • If he has already set up a payment plan, he won’t be able to set up another plan. 
  • He should not have any other tax debts. 

After getting into the homepage of the self-assessment plan, one has to give the ID and password to sign in to the Government Gateway. 


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