DWP and HMRC arrears are both priority debts that can have serious consequences if left unpaid. Find out the steps you can take to help if you’re struggling to keep up with your repayments with our expert guide.
Why might I be in debt to the DWP or HMRC?
HM Revenue & Customs, known as HMRC, are responsible for collecting our taxes including Income Tax, National Insurance, and VAT. If you miss the payment deadline for any of these types of tax and fall into arrears, you could be at risk of facing debt recovery action including a visit from the bailiffs.
You might owe money to the Department of Work and Pensions (DWP) if your benefits have been overpaid. This could be due a mistake made by the DWP or because your personal circumstances have changed, and you’ve received more benefit money than you’re owed.
What should I do if I’m struggling with my payments to the DWP or HMRC?
If you find yourself in this situation – for whatever reason – there are several steps to take that might help:
Act straightaway
Both HMRC and DWP arrears are priority debts, meaning they can lead to serious consequences if they remain unpaid. Priority debts should always be paid before other types of debt like credit card or personal loan repayments.
If you’re struggling to make payments to the DWP or HMRC, try to act as soon possible. It’s best to take steps to address the problem before you miss a payment if you can.
The first step if you’re falling behind with payments to HMRC is to double-check that your tax bill is correct. If your circumstances have changed in recent months and your actual earnings and expenses differ from the data HMRC has, they might be asking you for money that you don’t actually owe.
Get in contact
Next, get in touch with the organisations directly to let them know what’s happening. If you need to repay a Universal Credit advance payment, you can call the Universal Credit helpline or log a note in your online account. If you’re finding it tough to keep up with payments to clear another benefit or a tax credit debt, contact the DWP Debt Management Centre.
Once you’ve explained the situation, HMRC or the DWP may agree to temporarily reduce your payments, allow you to set up a new payment plan, or even defer your repayments.
Make a new budget
Making a budget doesn’t only help you keep on top of your finances; it can also help you when you’re negotiating with the DWP or HMRC.
Calculate all your essential monthly expenses. This should include things you need to pay each month such as your mortgage or rent payment, utility bills, Council Tax, and food. Take this figure away from your monthly salary and you’ll be left with your disposable income. This is the money that could be put towards your debt and the maximum amount you can afford to pay without putting your essentials at risk.
Put together a payment proposal
Now that you have an accurate budget, you can make a new payment proposal to the HMRC or DWP.
The figure you quote should be based on your affordability and an amount that would be considered fair. If you have £500 leftover once all your bills are paid, but you only propose paying £100 a month towards your debt, for example, your suggestion will likely be rejected.
Your proposal should also be based on a new regular repayment, rather than a one-off lump sum. HMRC will likely ask for the debt to be paid before your next tax bill is due, so keep this in mind when working out your initial offer.
If you have very limited disposable income, the DWP or HRMC may agree to extend your repayment period, but this will only happen if you can prove you don’t have any additional funds to put towards your debt.
Instead of calling and negotiating over the phone, HMRC may let you set up a new payment plan online. This option is available if you owe on your:
Self-assessment tax and
- You filed your last tax return
- Owe £30,000 or less
- You’re within 60 days of the payment deadline
- You don’t have any other debts with HMRC
Employers’ PAYE and
- You’ve missed the PAYE bill payment deadline
- Owe £50,000 or less
- Plan to pay off your debt within the next 12 months
- You have debts that are five years old or less
- You don’t have any other debts with HMRC
VAT and
- You’ve missed the payment deadline
- Owe £50,000 or less
- Plan to pay off your debt within the next 12 months
- You have filled all your tax returns
- You don’t have any other debts with HMRC
Once your new payment plan has been agreed, you can start making repayments again at a more manageable pace.
Enter Breathing Space
If you’re concerned that the DWP or HMRC might take further debt recovery action against you, like calling in the bailiffs, you could enter Breathing Space.
This is a government scheme that gives you 60 days to seek debt advice and find an appropriate debt management solution. During this time, your creditors won’t chase you, you won’t face any extra interest or charges on your debt, and you won’t face any further debt recovery action. You can enter one Breathing Space each year.
You could use this 60-day period to work on your new budget and payment proposal, secure expert advice, and/or enter a new debt management solution.
However, it’s important that you keep making payments towards your debt during this time. A small amount, even if it doesn’t cover the full repayment requested, is better than nothing.
Seek debt advice
When you’re struggling with priority debts like money owed to the DWP or HMRC, finding professional debt advice can help you get back on track with your finances. Our friendly team of experts will take the time to understand your situation and talk you through the different debt management solutions available so that you can find the right one for you. They can even negotiate with HMRC or the DWP on your behalf.
Need help if you’re struggling with payments to the DWP or HMRC? Our team is here to help. Give us a call on 0161 8260 585 or send a message here
