What if I have a tax credits overpayment?

Updated on 13 April 2023

Tax basics

Overpayments and underpayments are a normal part of the tax credits system. This is because when you receive a tax credits award, the initial award and payments are provisional. This initial award is based on your circumstances and previous year’s income or, adjusted in-year based on an estimate of your current year’s income.

Illustration of a tax credits documents and some coins

Usually the amount of tax credits you are actually entitled to for a tax year is not decided until the award ends and HMRC review your actual income and circumstances for the year. HMRC will then make their final decision about your entitlement for the tax year just ended. At that point, HMRC compare what they have paid you with what you were entitled to and if they have paid you more than your entitlement, you will have an overpayment. If they have paid you less than you were entitled to, you will have an underpayment.

This is normally done after the end of the tax year for which tax credits have been paid, but if you have claimed universal credit (UC) in the same tax year as you claimed tax credits, HMRC will usually finalise your tax credit award during the year. This is called in-year finalisation.

We explain how overpayments occur, how to challenge an overpayment and how to pay back an overpayment in our tax credits and benefits section.

You will also find information on what to do if you are finding it difficult to repay an overpayment as well as links to more detailed information.

Tax guides

Introduction to the tax system How do I work out my tax? What income is taxable? What tax allowances am I entitled to? What tax rates apply to me? How is my tax collected? What if I cannot pay my tax bill? Do I need to complete a tax return? Self Assessment: understanding the basics What is Simple Assessment? How do I claim tax back? How do I claim back tax I have overpaid through PAYE on wages or pensions? How do I claim back tax if I complete a tax return? How do I claim back tax if I am taxed under the Construction Industry Scheme (CIS)? How do I claim back tax on savings income? How do I claim a marriage allowance refund? How do I claim back tax on a payment protection insurance (PPI) pay-out? Should I use a tax refund company? What is National Insurance? How do I get a National Insurance number? What are Specified Adult Childcare credits? What is Scottish income tax? What is devolution? Do I have to pay Scottish income tax? How does Scottish income tax work? What is Welsh income tax? Do I have to pay Welsh income tax? Do I have to join a pension scheme? Tax relief on your pension contributions HMRC digital services Enquiries, penalties, appeals, complaints and debt Enquiries How to survive an enquiry by HMRC Tax penalties Tax appeals Alternative Dispute Resolution How do I complain to HMRC? What if I cannot pay my tax bill? What if I have a tax credits overpayment?

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Am I employed, self-employed, both, or neither? How do I register for tax and National Insurance? What business records should I keep? Working out profits, losses and capital allowances When do I make Self Assessment payments and file my tax return? How do I pay tax on self-employed income? What tax allowances am I entitled to? What is the trading allowance? What National Insurance do I pay if I am self-employed? What is the Construction Industry Scheme (CIS)? Tax checks for taxi, private hire and scrap metal licences How do I work out my profits for universal credit? Do I have to pay VAT if I am self-employed? What is Making Tax Digital for VAT? Pensions and self-employment How do I repay my student loan if I am self-employed? Introduction to enquiries

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