Families made to repay tax credit overpayments could face ‘serious financial hardship’

The Low Income Tax Reform Group (LITRG) is ‘extremely concerned’ by the Government’s latest changes to tax credit overpayments – which will see families who have overpaid tax credits forced to repay the money at an accelerated rate.

With the recent introduction of the new tax year, claimants with an income of £20,000 or more will be forced to reimburse payments far more rapidly than in previous years.

In fact, under changes newly in force, those who still owe money to HMRC will see their latest tax credit award slashed by 50 per cent, as opposed to a previous 25 per cent.

The UK tax authority believes that the changes will cut the amount of time that people spend in debt, but LITRG chairman Anthony Thomas has warned that many families could face ‘serious financial hardship’.

Worse still, the chairman believes that many British claimants could be unaware entirely that their credits are about to be slashed.

“This is likely to hit those with high childcare costs or who receive extra payments due to disability even harder as their awards will be higher,” said the chairman.

“We fully support the need for HMRC to recover overpayment debt but this should not be at such a rate that it has the potential to plunge people into serious financial hardship.

“We are extremely concerned that this measure, especially when combined with other recent debt measures like recovering working tax credit overpayments from ongoing child tax credit awards and vice versa, might well cause claimants to fall into hardship,” Mr Thomas said.