Managing HMRC tax credit overpayments

Managing HMRC Tax Credit Overpayments: UK Residents’ Guide

Tax credits can be a lifesaver for many families in the UK, providing essential financial support. However, overpayments can happen, leading to unexpected debts with HM Revenue & Customs (HMRC). In this comprehensive guide, we’ll delve into everything you need to know about managing HMRC tax credit overpayments, from repayment options to what to do if you can’t afford repayments.

Understanding HMRC Tax Credit Overpayments

HMRC tax credits are designed to provide financial assistance to eligible individuals and families. However, overpayments can occur due to various reasons, such as changes in income, incorrect information provided, or failure to report changes promptly.

When HMRC identifies an overpayment, they will notify you through a ‘Notice of Overpayment,’ detailing the amount owed and the reasons behind it. It’s crucial to review this notice carefully to understand why the overpayment occurred.

Managing HMRC tax credit overpayments

Repaying Tax Credit Overpayments: Your Options

  1. Repaying in Full: If you have the means to repay the entire overpayment amount upfront, this is often the simplest option. You can do this through various methods, such as online bank transfers, debit cards, or cheque payments.
  2. Setting Up a Payment Plan: For those unable to repay the full amount immediately, HMRC allows setting up a payment plan. This involves spreading the repayments over a specified period, making it more manageable for your budget.
  3. Adjusting Future Tax Credit Payments: In some cases, HMRC may agree to adjust your future tax credit payments to recover the overpayment gradually. This option can be beneficial if you’re facing financial constraints.
  4. Seeking Financial Support: If you’re struggling financially and cannot afford the repayments, you may be eligible for additional support or benefits. Contacting HMRC or seeking advice from Citizens Advice Bureau can help explore these options.

How to Repay Your Tax Credits: Step-by-Step Guide

  1. Review Your Notice of Overpayment: Start by carefully reviewing the Notice of Overpayment sent by HMRC. Understand the reasons behind the overpayment and the amount owed.
  2. Assess Your Financial Situation: Determine your financial capacity to repay the overpayment. Consider your income, expenses, and any other financial commitments.
  3. Choose a Repayment Option: Based on your assessment, choose the most suitable repayment option. This could be repaying in full, setting up a payment plan, or exploring other arrangements with HMRC.
  4. Contact HMRC: If you need assistance or wish to discuss repayment options, contact HMRC promptly. They can provide guidance and support based on your circumstances.
  5. Follow Through with Repayments: Once you’ve agreed on a repayment plan or arrangement, ensure you stick to the agreed schedule. Missing payments can lead to additional penalties or complications.

What Happens If You Do Not Repay HMRC?

Failing to repay HMRC tax credit overpayments can have serious consequences, including:

  1. Debt Collection Actions: HMRC may take debt collection actions to recover the outstanding amount. This can include issuing County Court Judgments (CCJs) or using debt collection agencies.
  2. Legal Proceedings: Continued non-payment can lead to legal proceedings, potentially resulting in court orders or seizure of assets to recover the debt.
  3. Impact on Credit Rating: Unresolved debts with HMRC can negatively impact your credit rating, making it challenging to access credit or loans in the future.
  4. Interest and Penalties: HMRC may apply interest and penalties on overdue amounts, increasing the overall debt.

If You Cannot Afford Your Repayments

If you find yourself unable to afford the repayments for HMRC tax credit overpayments, consider the following options:

  1. Contact HMRC: Inform HMRC about your financial situation and discuss alternative repayment arrangements. They may offer flexible options based on your circumstances..
  2. Apply for Financial Support: Check if you’re eligible for additional financial support or benefits, such as Universal Credit or discretionary housing payments. These can ease financial pressures and assist in meeting repayment obligations.
  3. Review Your Budget: Conduct a thorough review of your budget to identify areas where you can make savings or adjustments. This can free up funds for repaying HMRC without compromising essential expenses.
  4. Find Independent Debt Expert Advice: Contacting debt management professionals like Acme Credit Consultants can provide valuable insights and assistance. They can review your financial situation, negotiate with HMRC on your behalf, and help you explore alternative options


Managing HMRC tax credit overpayments requires careful planning, communication, and proactive steps. By understanding the repayment options, seeking professional advice when needed, and staying on top of your financial responsibilities, you can navigate through this process effectively. Remember, addressing the issue promptly can prevent further complications and ensure a smoother financial journey.

For expert debt management advice and assistance, contact Acme Credit Consultants at 0203 318 0990. Our team is dedicated to helping UK residents regain financial stability and peace of mind.


  • Rajnish Tyagi

    Rajnish Tyagi possesses certification as a qualified debt advisor and specializes in writing about debt management and related topics. His aim is to assist individuals in comprehending and effectively managing their debts and credit issues. Additionally, Rajnish Tyagi holds the position of managing principal at "Acme Credit Consultants Ltd," an FCA regulated firm that provides tailored debt solutions to both individuals and businesses facing financial challenges.

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