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The true cost of tax credit overpayments: A fairer approach

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Extremely vulnerable people in severe financial difficulty are facing tax credit overpayment debts.

The Department for Work and Pensions should be using best practice, such as affordability assessments, to decide if people can pay back the debt. Instead, they take deductions from Universal Credit payments, which pushes people into deeper hardship.

Our latest report, ‘The true cost of tax debt overpayments’ finds:

98% of respondents struggled to cover essentials because of unaffordable deductions

There is no pro-active assessment of affordability

Nine in ten (89%) clients we surveyed had a payment taken which they couldn’t afford.

98% of respondents struggled to cover essentials because of unaffordable deductions

In addition, many people are left with less disposable income each month

A client with credit debt has £80 less disposable income a month compared to the average

Number two

Communication can be unclear

Only one in three (30%) clients surveyed knew how much money was going to be taken.

63% of respondents were not clear how they had incurred tax credit debt

Number 3

Vulnerabilities among clients are not identified

Data is not used to find out if clients face difficulties such as mental health problems or disabilities. This means the DWP relies on clients to disclose any vulnerabilities.

We found that nearly all (97%) of vulnerable clients surveyed had an increase in anxiety or depression because of their experience.

Join us in calling for the Department for Work and Pensions to make changes to the deductions system to resolve these problems and reduce the hardship that being caused.

We believe that most of these changes could be made with changes to the Universal Credit system rather than wider regulatory or policy change:

Our recommendations for dealing with tax credit

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