Tax credit and benefit appeals – what to do if your income figures are changed automatically

Published on 19 December 2016

Real Time Information (RTI) payroll data is being used by HMRC and other benefit-paying departments to help identify cases where claimants have either failed to declare or have under-declared earnings and non-state pension income. However, sometimes the RTI information can be inaccurate. Here we tell you how to challenge the decision and how to gather the supporting evidence required.

For some time now, benefit authorities such as the Department for Work and Pensions (DWP), local councils and, for tax credits, HM Revenue & Customs (HMRC) have been comparing earnings information reported by employers and pension providers to HMRC for tax purposes with earnings declared on claims for tax credits, housing and other benefits with an aim to combat error and fraud. The earnings information is gathered by HMRC from their RTI system which is used to collect Pay as You Earn (PAYE) information from employers and pension providers. Most employers are required to send income details electronically to HMRC each time they pay you.

However there are sometimes issues with RTI data which means that the data HMRC hold about you in the RTI system is wrong. There can also be problems like duplicate employments – where HMRC’s systems record employees’ details more than once for the same job.

How do I know if HMRC or DWP have used RTI information to make their decision?

You should receive a decision letter or award notice for your tax credits or benefit that shows the decision and explains what income figure has been used. You may also get a letter that says that the paying department have used RTI data to amend the income figure on your tax credit or benefit claim.

Ideally, the authority involved would advise you of any information used in every case and give you the opportunity to challenge anything you think is incorrect BEFORE a tax credit or benefit award changes. However sometimes this does not happen and the first you know about your claim being reassessed is a letter on the doormat saying that you have been overpaid and must repay the money and/or that your future payments will go down.

How do I know if the income figure used is correct?

The first thing you need to do if your income has been changed is check it against your payslips or P60. We explain below how to get hold of pay information you may have lost if it is for a previous year.

You should also carefully check the rules for the benefit or tax credit that you are claiming as sometimes you can make deductions from your income. For example, in tax credits you can deduct things such as pension contributions, gift aid payments, some work expenses and the first £100 a week of any statutory maternity, paternity, adoption and shared parental leave payments. HMRC will not necessarily know that these types of deductions should be made from your pay data unless you tell them, so you should check the rules carefully.

What can I do if the decision is incorrect? 

If you believe the decision that you have been overpaid is wrong, because the income figure that has been used to make the change is wrong, the most important thing to do is to follow the appeal process for the benefit or tax credit you are claiming. Normally appeals have strict time limits and your decision letter should tell you how to appeal and the deadline for appealing. For some benefits you can ask for an explanation of the full reasons for the decision and if you do that you will get extra time to challenge the decision – but check your letter carefully because this does not apply to all benefits and tax credits.

You need to send as much evidence as you can showing your actual income for the year. The following documents may help:

  • P60/P45
  • Bank statements showing payments from your employer(s)
  • Payslips

You may spot from inspecting your pay documents that your employer has made a payroll error, causing an incorrect income figure. There are no clear rules on who to contact in the first instance about resolving this (your employer or HMRC?) however, as it is the employer’s duty to account to HMRC for the correct PAYE and NIC, (which in the event of a payroll error may not have been done) we suggest you contact HMRC in the first instance who will hopefully be able to work with you and your employer to rectify the error. If you cannot spot any errors in your pay documents, but you still cannot make things add up, the error may have occurred on HMRC’s side – i.e. after they received the information from your employer – in which case you should also contact HMRC to advise them of this.

It is important that you do not delay starting an appeal while you are trying to work out what has happened. You can always send extra information in at a later date.

What if I have lost my pay information?

The easiest thing to do is ask your employer for copies of your missing payslips. Employers are obliged to keep records of pay for three years and so they should be able to provide you with information for the last three years. However they are under no obligation to show them to you, so should ask them nicely! 

They may also be able to provide you with a duplicate P60 – your P60 is a form which shows your total earnings from a job or pension in the previous tax year. They will not be able to provide a duplicate of a P45 (the form you receive when you leave an employment). They may instead be able to provide you with a ‘statement of earnings’ on headed paper which should act as a replacement for a P45.

As a fallback, you could contact HMRC. They will be able to provide you with alternative, official information regarding the amount of pay that you earned and tax that you paid. Usually you can simply request this ‘employment history’ over the phone. Sometimes they may ask you to write in and request the information. We attach below a sample letter to guide you – you should insert your own details in the bracketed areas, for example (Your address).

HMRC should then send you a letter with the following information in a table: PAYE Reference/Pay/Tax/Start Date/End Date. 

Example: James’s Housing Benefit amount was changed. The reason for this was that his RTI data from HMRC showed that in 2015/16 he has earned £7,112 rather than the £6,201 he had stated.

He wrote to HMRC asking them for his pay and tax details for 2015/16.  In their response they sent him the following information:

PAYE Reference Pay Tax Start Date End Date
120/X344 £911 £0   31/05/2015
120/X344 £911 £0   31/05/2015
338/AZ445 £3,287 £658 14/06/2015 01/01/2016
195/F5 £2,003 £0 09/02/2016  


James could see immediately that the cause of the problem is that he has a duplicate employment record.  This explains the difference between the RTI data compared to what James had given to the Housing Benefit authorities.

James asks for a reconsideration of his housing benefit decision, enclosing the letter from HMRC as evidence that the RTI data is wrong.

James should also tell HMRC about the mistake in his pay and tax details as otherwise it could flow through their systems and affect things like the end of year reconciliation that they perform (the P800 process).

It is important that James does not delay starting an appeal while he is waiting for the letter from HMRC. He can always send the extra evidence in at a later date.

(16-12-2016)

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