How to deal with debt from the DWP

Many of us claim benefits or social fund loans in the UK, from Universal Credit, Income Support and Jobseeker’s Allowance, to budgeting loans and tax credits. These benefits and loans are issued by the DWP (Department for Work and Pensions).

If you’re in debt to the DWP, you’re not alone. It’s common for benefits to be accidentally overpaid because you or the DWP made a mistake, or you had a change in your circumstances.

Don’t worry. While it can feel stressful to be contacted by the DWP about owing money, there are lots of things you can do to sort out the situation and repay in manageable instalments, if you actually owe the debt.

In this article, we’re going to cover exactly how to deal with debt from the DWP, how to challenge an overpayment and what to do if you can’t repay any money at all.

How can I deal with debt from the DWP?

You can deal with debt from the DWP by checking whether you actually owe the debt and the DWP hasn’t made a mistake, seeing if the DWP will allow you to keep an overpayment that wasn’t your fault. and challenging the overpayment if you feel like you have a good case.

If you’re in debt to the DWP, you can also seek free debt support from a charity or Citizen’s Advice, know your rights against DWP debt collectors and report them to the FCA if they breach any rules, treat benefit repayments as a priority debt and consider an insolvency situation if you’re in acute financial distress.

Why has the DWP sent me a letter saying I owe them money?

If you’ve received a letter from DWP Debt Management asking you to repay a benefit advance, or saying that you’ve been overpaid on your benefits, this could be for a few reasons:

• You received a ‘short term benefit advance’ or ‘budgeting loan’ (interest-free loan from the government), because you needed money for essentials before your benefits payment day.
• You didn’t report a change of circumstances, for example, moving in with a partner, that would alter the amount of benefit you were entitled to.
• You gave the wrong information when making your benefits claim, or when reporting a change of circumstances.
• The DWP made a mistake with your payment.

It could also be the case that you haven’t been overpaid on your benefits, and the letter from DWP Debt Management was sent to you in error. See our section: ‘9 steps to deal with debt from the DWP’ for what you should do if you think the overpayment claim is incorrect.

In most cases, you’ll have to repay benefit overpayments, and of course, the same goes for interest-free government loans you’ve been given.

If you deliberately did something to cause the overpayment, you may have to pay a civil penalty. Civil penalties are for benefit fraud, like deliberately failing to report a new job so that you could continue receiving more money in Universal Credit. The civil penalty is usually around £50, and will be added to the amount of benefit that you have to pay back. You can appeal against a civil penalty.

If you don’t repay the money, the DWP may pass your debt on to the following debt collection services:

• Advantis
• BPO Collections
• CCS Collect
• Moorcroft
• Past Due Credit
• Resolve Call
• Shakespeare Martineau

The debt collector will communicate with you to arrange repayments. All debt collectors – including DWP debt management – have to follow rules imposed by the Financial Conduct Authority (FCA) to treat you respectfully and not behave abusively or misleadingly.

It’s important to not ignore communications from debt collectors organised by the DWP, because there are lots of ways to repay the debt in a manageable way. If you refuse to repay the debt after debt collector contact, you can eventually be taken to court. However, this is unlikely to happen if you’ve made contact with the DWP and either made an effort to repay your debt or notified them that you can’t.

You can contact the DWP Debt Management contact centre through:

Telephone: 0800 916 0647
Textphone: 0800 916 0651
NGT text relay (if you cannot hear or speak on the phone): 18001 then 0800 916 0647
Video relay service for British Sign Language (BSL) users

How much money do the DWP take in debt repayments?

The DWP will usually take money either from your future benefit payments, or ask you to pay the money directly to them if you’ve stopped receiving benefits.

If you’ve been overpaid Universal Credit, the DWP can’t deduct more than 30% of your usual Universal Credit allowance. If you’ve been overpaid Child Tax Credits or Working Tax Credits, the amount that will be deducted will vary from 10% to 100% of the amount you’re entitled to.

Housing benefit overpayments are usually deducted at a rate of £11.10 per week. The following benefits:

• Income Support
• State Pension Credit
• Income-based Jobseeker’s Allowance (JSA)
• Income-based Employment Support Allowance (ESA)

will be reduced by a rate of £11.25 per week if they have been overpaid. If you’ve been overpaid because of benefit fraud and you’ve either been convicted of fraud or admitted the offence under caution, these benefits will be deducted at a rate of £30 a week.

The DWP says that the maximum amount that can be recovered from new style JSA and ESA (which are benefits which can be claimed at the same time as Universal Credit, if you meet the right criteria), are 40% of the amount that you’re allowed to get.

If you’re in long-term residential accommodation, for example, a nursing home, your benefits will be deducted at a maximum of £3.75 a week.

If you don’t receive benefits anymore, you can make repayments through a bank standing order, bank giro credit (a paper slip which you give to a bank branch, instructing them to credit money to a specific account at that branch – in this case, the DWP’s), or via online banking.

You’ll get a letter from DWP debt management telling you how much you need to repay.

Who are DWP Debt Management?

DWP Debt Management are a branch of the Department for Work and Pensions. Their job is to get back benefits which have been overpaid to DWP customers. These benefits include:

• Universal Credit
• Income Support
• Jobseekers Allowance
• Outstanding Social Fund Loans
• Advances like short-term benefit advances
• Tax Credit overpayments
• Overpaid benefits from deceased customers (these are handled by the Recovery from Estates team).
• Social Security benefits in some compensation cases, and NHS costs in some injury cases (these are handled by the Compensation Recover Unit).

DWP Debt Management will usually only contact you by letter or phone. If they do need to visit, they will arrange a DWP representative to call round.

9 steps to deal with debt from the DWP

Check whether you were actually paid the right amount

The DWP might have made an error in saying you were overpaid, for example, if they think:

• you’re living with a partner when you’re not
• you’re working when you’re not, or earning more than you actually do
• you have more savings than you do
• you’re receiving student finance when you’re not

These errors aren’t uncommon, because of the sheer volume of administration that the DWP has to process, as well as the fact that automated letters are often sent out. If you think you were actually paid the right amount of benefit, contact the DWP and let them know.

See if the DWP made an error in paying you too much

If it was the DWP’s fault that you were paid too much benefit, you can challenge the decision. If the DWP made a mistake when working out your payments, didn’t apply changes to your claim that you told them about, or didn’t correctly record your information, they may not ask you to pay it back. Call them and check. If the DWP still want you to pay them back, you can ask for a mandatory reconsideration, which must be within one month of receiving the DWP’s decision.

For the DWP to change a decision, you’ll need to provide evidence that the overpayment was not your fault. For example, you’ll need copies of evidence that you:

• Reported a change in circumstances
• Are a carer
• Live alone rather than with a partner.

If the DWP still won’t change their decision after this, you can appeal to an independent tribunal. A tribunal judge will assess your case based on all the evidence you and the DWP send in.

Check if you can challenge the overpayment

Sometimes, you’re overpaid benefit because you yourself made a mistake, or failed to declare something like a partner moving in or a new job. It may be the case that you genuinely didn’t realise you had to declare a change.

In rare cases, it is possible to challenge an overpayment even though it was your fault. Seek independent advice from your local Citizens Advice, and ask one of their advisers to help you challenge the overpayment.

Ask the DWP if you can pay them back in instalments

If you can’t contest the debt to the DWP and you can’t pay off the entire debt at once (and you’re not getting any benefits that can be reduced), you can call the DWP debt management contact centre and ask to pay in instalments. Remember that you should always be able to pay for your basic needs such as food, warmth and housing (your rent or mortgage), and if you can’t afford these as well as your debt repayments, contact the DWP about making reduced payments.

Tell the DWP if you can’t pay anything at all

In rare cases, the DWP won’t make you pay anything back if you can prove that any debt repayments would affect your ability to pay for necessities like food and electricity. You would have to have special circumstances for the DWP to consider this, for example, a mental or physical health condition that makes your finances more difficult.

Make a budget which includes your income and the amount you have to spend on necessities like food and rent, and use it to show the DWP that you can’t afford to pay anything back.

If the DWP refuses to change how you pay and you think this is unfair, you can make a complaint on the Gov.UK website.

Remember that benefit overpayments are a priority debt

Benefit overpayments are what we call a priority debt, which means you must prioritise paying them over things like credit card bills. This is because the consequences of not repaying benefit debt is more serious than other types of debt, for example, money could be deducted from your other benefits to pay these off. It’s better to get in touch with the DWP and arrange affordable repayments, rather than having money taken which you may not be able to afford. Other types of priority debt include council tax, court fines and child maintenance arrears, as well as payments which keep a roof over your head, such as rent and mortgage arrears.

Know your rights against DWP debt collectors

Like all debt collectors, DWP Debt Management is regulated by the Financial Conduct Authority. As a result, DWP debt collectors must never:

• Call you at unreasonable times (outside of 8am-9pm on working days, and never on weekends or holidays).
• Call you at work without permission
• Let your employer, friends or relatives know that you owe a debt or that they’re a debt collector
• Use legal language or jargon to confuse you
• Contact you on social media
• Pretend that they have legal powers or authority which they don’t have
• Pretend that certain things can happen when they reasonably can’t
• Forging documents to scare you into paying your debt (this is fraud).
• Threaten or pressure you into paying off a debt
• Behave in a psychologically, physically or verbally abusive manner

See the Financial Conduct Authority (FCA) handbook for the full list of debt collectors are not allowed to do in the UK.

Consider an insolvency solution

There are some situations where you just can’t afford to repay debt, because your finances are in such a serious situation. For example, you might owe multiple debts. The government offers solutions like Individual Voluntary Arrangements (IVAs), which allow you to pay back a small, affordable percentage of your debt and get the rest written off after the IVA ends (usually in 5-6 years). After the IVA your debts will all be cleared, no matter how much you still owe. Benefit overpayments can be included in an IVA, which means that you’ll only have to pay back a minor percentage of the overpayment every month based on what you can afford. This could save you from true financial hardship, as you’ll be able to afford your basic living expenses, on top of making small repayments and getting your debt cleared. However, an IVA does affect your credit rating for the duration that you have it.

Seek free debt advice

Debt charities like Christians Against Poverty, StepChange and National Debtline offer free, expert advice on debt. It’s a good idea to get in touch with them if you’re dealing with debt from the DWP, as they can offer you specialist support and you won’t feel so alone.

Can DWP debt management take me to court?

Like any debt collection company, the DWP can take you to court if you continue to ignore their contact and refuse to pay them. If the DWP sues you in court and wins, they can get a County Court Judgement (CCJ) order against you.

If you have a CCJ against you, the DWP can take the benefit overpayment from your bank account, salary or assets in the following ways:

• Third Party Debt Order. This orders the person who holds your money (usually your bank) to pay it straight to the person you owe, i.e. the DWP. The DWP will apply for an order tells your bank or building society to freeze your account. You’ll then get a form called an N349 Interim third party debt order which will inform you that the money in your account has been frozen. This order will also tell you to attend your local County Court hearing centre. Here, the judge will decide whether to make a Final Third Party Debt Order. If the judge does this, your bank or building society pays the creditor the frozen amount of money. Your bank is only allowed to freeze the amount of money in your account at the time of the Third Party Debt Order. Any money paid into your account after this cannot be frozen, and you can withdraw it.
• Attachment of Earnings. This is a court order which tells your employer to deduct money straight from your salary to pay off your debt. This money goes straight to the court.
• Charging order. If you own your own home and you refuse to pay the DWP the court-ordered debt, the court can put your home up as collateral against the debt. This means that if you continue not to pay the debt, the DWP has the right to force you to sell your home to pay it off.

Is DWP Debt Recovery suspended in 2021?

DWP Debt Recover have not suspended their recovery of benefit overpayments in 2021. The DWP temporarily paused the recover of benefit overpayments for three months in April 2020, but these were resumed on the 6th July 2020.

Can I stop the DWP chasing me for debt?

Unfortunately, the DWP are unlikely to stop chasing you for a benefit overpayment that you owe. If you included benefit overpayments in an insolvency solution like bankruptcy, you would not be liable for the debt, unless the debt was as a result of benefit fraud, in which case you would still have to pay it according to the Insolvency Act of 1986.

Even if your debt is statute barred, which means it is over six years old and technically not recoverable by court action (as long as you haven’t acknowledged it or made a payment towards it in six years), you may still have to pay it. The Welfare Reform Act of 2012 says that overpayments can still be recovered by deducting money from current benefits, even if it is statute barred.

The best thing you can do – if there is no way you can successfully challenge the overpayment – is work out an affordable repayment plan with the DWP. If your financial situation is really serious, it is worth considering a solution like an IVA or Debt Relief Order (DRO). A DRO gives you legal protection against your creditors, including the DWP (unless your benefit overpayment was due to fraud), and writes off your debt after 12 months.

Now that we’ve gone through exactly how to deal with debt to the DWP, how to challenge an over payment and what to do if you can’t pay any money to the DWP at all, we hope you’ve found this a helpful read. Remember that while dealing with debt is stressful, there is always a way that you can pay it back affordably, and you should never feel ashamed about asking for help.