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4 min read

Can Tax Credit Debt Be Written Off?

Tax Credits are benefit payments which are designed to help those with children or those who work on low income. Some people may get into Tax Credit debt if they are overpaid by HMRC by mistake. A commonly asked question is ‘can Tax Credit debt be written off’?

Tax credit debt

How Tax Credit debt can be recovered

According to Gov.uk, since April 2016, the Department for Work and Pensions (DWP) have been able to recover overpaid Tax Credits from claimants who have moved on to Universal Credit.

What this means for someone who claims universal credit and is in Tax Credit debt, is that they may need to pay back the overpayment to HMRC. The ways that people are often asked to repay the money are:

  • If you get Universal Credit, DWP will reduce your Universal Credit payments to recover your Tax Credit debts;
  • If you’re no longer on Universal Credit, DWP can recover the money by deducting from your benefits, from voluntary payments, from your work pay, or through debt collection agencies.

The amount that HRMC deducts from you depends on the debt category as well as other circumstances. You can find out more from HMRC if you’re having difficulty paying back the Tax Credit debt, want to make a payment, or you want to find out exactly how much debt you owe.

Get Help With Debt

Can Tax Credit debt be written off?

Overpaid Tax Credits may be written off if you go bankrupt. However, there are many impacts of Bankruptcy, such as that it is publicly advertised, that should be considered. Because of this, it may be preferable to explore other debt solutions before choosing Bankruptcy.

An IVA may be the ideal choice. It is a debt solution that can help you write off unsecured debt. Usually any unsecured debts outstanding at the end of an agreed IVA would be written off on successful completion. This may include your Tax Credit debt, depending on your circumstances.

One of the main advantages of an IVA is that there is less stigma attached than Bankruptcy. In both an IVA and Bankruptcy your circumstances are assessed to work out what you can afford to pay to your creditors after your essential living costs are taken into account. You can find out if you’re eligible for an IVA by filling in our online application form below.

Am I Eligible?

Further reading