More than one in four people on Universal Credit are having money taken from their montly payments to repay tax credit overpayment debt, according to new figures released by the Department for Work and Pensions (DWP).
There are currently just under two million people in receipt of Universal Credit, with many more expected to be transferred to the new benefit system over the next few years.
DWP data indicates that there are 570,000 Universal Credit claimants who are repaying tax credit overpayments through Universal Credit.
Of these, 410,000 claimants with an outstanding tax credit debt have had a deduction to repay this debt within the last 31 days.
The mean and median amount of tax credit debt outstanding for these claimants is £1,560 and £610 respectively.
Some claimants with tax credit debts are currently not facing deductions to their Universal Credit payments.
The DWP says there are many different reasons for this, including:
- in work claimants who are not currently receiving benefit
- claimants whose benefit payment is too small to deduct from
- instances where a further deduction from benefit would leave the claimant with too little or zero payment
- insolvent claimants
The most common reason for overpaid tax credits, as with all all other social security benefits, is official error – either by benefit officials when calculating awards or indeliberate mistakes by claimants.
Gillian Guy, Chief Executive of Citizens Advice, said: “These new figures show the staggering number of people who get money deducted from their payments when moving from Tax Credits onto Universal Credit.
“Deductions can be made to repay previous overpayment debts, but these can be from years ago and often come as a surprise. They can also come on top of other deductions leaving some people unable to cover their essential costs.
“Our evidence shows that many people on Universal Credit are already struggling. Half of the people we help while waiting for their initial payment are unable to keep up with bills or rent – so any deductions can push people over the edge.
“More than a million people claiming Tax Credits are expected to move onto Universal Credit in the next stage of the rollout.
“The government must ensure that people have enough to live on and make sure that any debt collection is affordable.”
Labour’s Shadow Work and Pensions Secretary Margaret Greenwood said: “Repaying such high levels of Tax Credit debt, along with other deductions, can push people into severe hardship.
“People are often not even aware of their Tax Credit debt at all until they claim Universal Credit.
“And the government’s own research shows that well over half of people transferring from Tax Credits struggle to cope financially.
“Our social security system must protect people from poverty; under this government, it is failing.
“The government must stop the rollout of Universal Credit now.”
A Government spokesperson said: “Where an overpayment of Tax Credits is identified, we work to resolve the matter with the customer as quickly as possible.
“Safeguards are in place to ensure repayments are affordable and we have recently announced we will reduce the maximum amount that can be deducted from someone’s Universal Credit claim.
“Universal Credit is a better, simpler system with monthly assessments which reduce the likelihood of overpayments in future.”