More than a million universal credit payments cut over the past year because of historical overpaid tax credits
The government is cutting benefit payments to some of Britain’s poorest families or threatening them with debt collectors in a raid that is “plunging people into poverty”.
More than a million people have had their universal credit payments cut over the past year because they were overpaid tax credits in the past by HMRC.
Some of these debts are decades-old and in many cases the claimant was not at fault for the overpayment or aware that the debt existed.
Campaigners and MPs called on the government to immediately pause the deductions, an approach that they warned was causing widespread destitution at a time when people are already struggling with the cost-of-living crisis.
Millions docked because of historical overpayments
Official figures obtained by Sky News show that last year 1.3 million universal credit claimants had payments docked because of historical tax credit overpayments.
It’s a figure that’s been on the rise.
In total, the Department for Work and Pensions (DWP) deducted £372.576m from claimants on HMRC’s behalf.
Tax credits were introduced in 1999 by the then Labour government to encourage people into work by offering support payments to parents and those on low incomes.
The system is being phased out and people on tax credits will all have moved to Universal Credit by the end of next year.
In 2014 the Treasury agreed with the DWP that, as previous tax credit claimants moved onto Universal Credit, their old tax credit debts would be transferred and collected under the new system.
Blaming claimants for HMRC errors
While HMRC maintains that many of these erroneous payments are down to fraud or errors made by the claimant, a significant number are attributable to errors made by officials.
Charities warned that in some cases HMRC was blaming claimants for errors of its own making.
Michelle Welch from Bromley, south London, is one such case. She was facing deductions of £20 a month to recover an eight-year-old debt of £2,379.26.
Michelle Welch
The mother of three, who now works part-time at a British Heart Foundation charity shop, was hospitalised in October 2015 after suffering a mental health crisis.
Although a support officer telephoned HMRC to explain that she was no longer caring for her three children, HMRC did not stop the payments and the money continued being paid into a bank account that her partner was accessing to support her children.
After multiple attempts to notify the agency, the payments eventually stopped on 28 January 2016.
Years later, in August 2021, HMRC wrote to Ms Welch demanding that she repay the money the agency overpaid in the interim. They claimed she failed to notify them of her change in circumstances in time and her universal credit was docked as a result.
Ms Welch’s multiple appeals were rejected.
“I’m just living day by day. I can’t save. I can’t go out… I could put that extra money on gas and electric,” she said.
“I just feel like I’m not getting anywhere. I’m not getting anywhere fast.”
After Sky News intervened, HMRC agreed that Ms Welch was not at fault and has now cancelled the debt.
“We apologise to Ms Welch for the inconvenience and upset caused by our mistake,” HMRC said. “We’ve acted to correct her payments and a redress payment will be made.”
Ms Welch said her dealings with HMRC and DWP had left her feeling dejected, ignored and stuck in what was a difficult time in her life.
“It’s hard for a mother to give up one child let alone three because they’re mentally unwell. It wasn’t an easy thing to do. [It takes me back to] a place I would never want to be in again. It makes me feel ashamed and terrible.
“I busy myself so that I don’t have to think back to what I went through and what my children went through. It’s something I should talk to a psychiatrist about, not people I don’t know [at HMRC and DWP].”
Not an isolated case
Sky News spoke to dozens of claimants who said they were paying back debts they do not believe, or did not realise, they owed.
Many struggled to get a clear breakdown or explanation from HMRC when they challenged the demands for payment.
Vicky Timlin
Vicky Timlin, from Cheltenham, ended a tax credit claim in September 2021 after moving in with a partner.
She was then told to repay back £909.29 that had been overpaid to her. When she sought an explanation, an HMRC representative told her that the overpayment could only be explained by a “computer glitch” but she would have to repay it regardless.
Ms Timlin is not claiming Universal Credit so her payments have not been docked.
However, HMRC has warned her that the debt will be recouped through any future universal credit claim. Her debt has now been passed onto a private debt collection agency and she is on a payment plan for the next seven years.
Sky News understands that 29,000 cases are now being handled by private debt collection agencies.
“I felt completely helpless. I got off the phone and I was in absolute floods of tears because I just felt like this is so unfair.
“Why have I got to pay this money because of a computer glitch and there was literally nothing that I can do about it and they didn’t seem to care at all,” she said.
“They shouldn’t be doing it to people. They need to be able to explain to people properly why they owe this money and not give them different excuses every time.”
HMRC accepted that Vicky did nothing wrong and apologised for its failure to clearly explain the debt to Ms Timlin.
It maintained that she had been overpaid because previous re-calculations of her entitlement had triggered the system to generate duplicate payments.
It said this was a feature of the system and that these overpayments would have balanced out across the remainder of the financial year had she continued with the claim.
“To ensure customers receive regular payments of a similar amount, tax credits awards are calculated across the 12-month financial year,” HMRC said.
“Customers are required to tell us of any change in circumstances and when they do, awards are recalculated and balanced across the remainder of the period. This means when a claim ceases during the financial year, in some instances an overpayment may be due.”
Official errors disguised
Official reports published by HMRC suggest that errors on the part of officials make up a very small proportion of overpayments, compared to fraud and errors on the part of claimants.
However, charities pointed out that in many cases officials were contributing to errors by providing poor advice on the phone. In the case of Ms Welch, official error was disguised as a claimant error.
Campaigners say the system is causing widespread distress at a time when the cost-of-living crisis is already driving families into poverty.
Food bank visitors in debt to the government
The Trussell Trust, which oversees a network of more than 1,300 food banks across the UK, has said the vast majority of its visitors were in debt to the government.
MPs from across the political spectrum have urged the government to pause collections while the cost-of-living crisis is still raging.
Stephen Timms, MP for East Ham
Stephen Timms, MP for East Ham and chair of the work and pensions select committee, said: “People are completely unaware of these debts when suddenly money starts getting taken out of their Universal Credit monthly payments and, in a cost-of-living crisis with inflation running at current levels, that’s causing real hardship for people.
“So my select a committee, which is an all-party committee with a Conservative majority, recommended that the government should pause these deductions while inflation is running at its current level.
“Unfortunately, the government rejected that recommendation, but I think that would be very helpful just to support people through this really, really difficult time.”
Business
‘Absolutely gutted’: £16,500 Glastonbury packages won’t be fulfilled after company goes bust
Glastonbury ticket holders have been left thousands of pounds out of pocket after a luxury glamping company went bust.
Festival-goers who booked their tickets and accommodation with Yurtel have been told the company can no longer fulfil its orders and has ceased trading with immediate effect.
Money: Read all the latest news here
Some had spent more than £16,500 through Yurtel, with hospitality packages starting at £10,000.
In an email, Yurtel said it was unable to provide customers with any refunds, advising them to go through a third party to claim back the money once the liquidation process had started.
To add insult to injury, customers found out that Yurtel had failed to purchase the tickets for the 25 -29 June festival that they thought had been booked as part of their packages.
In a letter to customers, Yurtel’s founder Mickey Luke said: “I am deeply sorry that you have received this devastating news and am writing to apologise.
“Yurtel is a hospitality business who pride themselves on looking after our customers, delivering a unique product and striving to create a better client experience year on year. Due to a culmination of factors over the past years, we have failed to be able to continue to do so and are heartbroken.”
The Money blog has contacted Yurtel to see if the business has anything to add.
Several people have also reported that they were unable to pay by credit card at the time of booking, with the company instead asking for a bank transfer.
This means they are unable to use chargeback to get a refund. You can read more about that here…
Pic: PA
‘I feel really ripped off’
One of those customers was Lydia, who told Money she was “absolutely gutted” after spending thousands.
This year’s festival was “really important” to her as she was forced to miss out last year despite having tickets due to a health issue that left her needing an operation.
“We tried to get Glastonbury tickets through the normal kind of route and couldn’t get them,” the accountant said.
She ended up booking with Yurtel in November, sending over all the funds a month later.
“It’s super expensive. It was really, really important to us. Last year was gutting with the surgery and the whole situation around that was very traumatic, so it was a very special thing to then get the opportunity to go this year. It’s really gutting,” she said.
“I feel really ripped off and I’m really disappointed in the festival, to be honest. I think that response is just pretty rubbish.”
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Yurtel did not pay for festival tickets, Glastonbury says
Glastonbury said Yurtel was one of a small number of campsites local to the festival site – Worthy Farm – with limited access to purchase hospitality tickets for their guests in certain circumstances.
But, it had not paid for any tickets for the 2025 festival before going into liquidation, and so no tickets were secured for its guests, it added. Every year, Glastonbury’s website says that ticketing firm See Tickets is the only official source for buying tickets for the festival.
“As such we have no records of their bookings and are unable to take any responsibility for the services and the facilities they offer,” the festival said.
“Anyone who has paid Yurtel for a package including Glastonbury 2025 tickets will need to pursue any potential recompense available from them via the liquidation process as outlined in their communication to you.
“We are not able to incur the cost or responsibility of their loss or replacement.”
Instead, the festival has urged Yurtel customers to contact Yurtel@btguk.com to confirm their consent for personal data and details of their party to be shared with Glastonbury.
“We will then be able to provide details of alternative potential sources for those customers to purchase tickets and accommodation for this year’s festival,” the festival added.
‘Only option’ on offer is ‘pretty weak’
Lydia said she agreed for her details to be passed on to Glastonbury, and the festival has told her the only option is to pay for the tickets again from another provider.
“They are not giving us the opportunity to buy the tickets at face value. We would then have to go again and spend another stupidly unreasonable amount of money to be able to go. It’s pretty disappointing,” she added.
“It’s pretty weak that the only option they’re giving people who’ve already lost out on huge amounts of money is to go and spend huge amounts more money.”
It’s left her feeling like she won’t go to the festival this year – and she’s not hopeful about getting her money back.
She said: “To be honest, I just don’t think I can afford it.
“It’s already so much money wasted, and I’m not at all optimistic we’ll get anything back.”
Business
Federal judges rule Trump tariffs can stay in place for now – as president rages at trade court’s ‘country threatening decision’
A federal appeals court has ruled that Donald Trump’s sweeping international tariffs can remain in place for now, a day after three judges ruled the president exceeded his authority.
The Court of Appeals for the Federal Circuit (CAFC) has allowed the president to temporarily continue collecting tariffs under emergency legislation while it considers the government’s appeal.
It comes after the Court of International Trade blocked the additional taxes on foreign-made goods after its three-judge panel ruled that the Constitution gives Congress the power to levy taxes and tariffs – not the president.
The judges also ruled Mr Trump exceeded his authority by invoking the 1977 International Emergency Economic Powers Act.
The CAFC said the lower trade court and the Trump administration must respond by 5 June and 9 June, respectively.
Trump calls trade court ‘backroom hustlers’
Posting on Truth Social, Mr Trump said the trade court’s ruling was a “horrible, Country threatening decision,” and said he hopes the Supreme Court would reverse it “QUICKLY and DECISIVELY”.
After calling into question the appointment of the three judges, and suggesting the ruling was based on “purely a hatred of ‘TRUMP’,” he added: “Backroom ‘hustlers’ must not be allowed to destroy our Nation!
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Trump asked about ‘taco trade’
“The horrific decision stated that I would have to get the approval of Congress for these Tariffs. In other words, hundreds of politicians would sit around D.C. for weeks, and even months, trying to come to a conclusion as to what to charge other Countries that are treating us unfairly.
“If allowed to stand, this would completely destroy Presidential Power — The Presidency would never be the same!”
The US president unveiled the controversial measures on “Liberation Day” in April, which included a 10% tariff on UK imports and caused aggressive sell-offs in the stock market.
Mr Trump argued he invoked the decades-old law to collect international tariffs because it was a “national emergency”.
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From April: ‘This is Liberation Day’
Tariffs ‘direct threat’ to business – Schwab
The trade court ruling marked the latest legal challenge to the tariffs, and related to a case brought on behalf of five small businesses that import goods from other countries.
Jeffrey Schwab, senior counsel for the Liberty Justice Center – a nonprofit representing the five firms – said the appeal court would ultimately agree that the tariffs posed “a direct threat to the very survival of these businesses”.
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US treasury secretary Scott Bessent also told Fox News on Thursday that the initial ruling had not interfered with trade deal negotiations with partners.
He said that countries “are coming to us in good faith” and “we’ve seen no change in their attitude in the past 48 hours,” before saying he would meet with a Japanese delegation in Washington on Friday.
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