Tax credits overpayment and cost of living payment

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Sorry for the lengthy post.

So, my 15 year old daughter was diagnosed as ASD years ago, but I resisted claiming anything for her, as I was managing. Then lockdown came along, and my husband and I were both furloughed, and things got tough. So 2021 I claimed for DLA, and was approved at the lowest rate for both components. Fantastic.

Then around 3 months later, out of the blue, I got a letter from DWP saying that they'd added the disability component to my (longstanding, but never paying out) tax credits award. So I was to receive £20 per month. 

Anyway, things went really well with work last year and my income was £10,000 higher than most years, and they wrote at renewal saying that they had overpaid me the £20 per month and I owed them £228(ish). However, work is now back to normal, and my salary is back to normal. I don't expect them to continue paying my tax credits, but I'm not sure what happens with the overpayment if my salary has now dropped to marginally under the threshold and they aren't paying me anything.

Then today, I found that they have paid me the cost of living £326 payment, and I have no idea at all if I should be entitled to it.

Does anyone know what the criteria is for the £326? As in, if I had an active claim, but then they decide it was overpaid, what happens? I logged into my tax credits account and it just says "your claim will renew automatically". 


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  • poppy12345
    poppy12345 Posts: 18,087 Forumite
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    Sorry for the lengthy post.

    So, my 15 year old daughter was diagnosed as ASD years ago, but I resisted claiming anything for her, as I was managing. Then lockdown came along, and my husband and I were both furloughed, and things got tough. So 2021 I claimed for DLA, and was approved at the lowest rate for both components. Fantastic.

    Then around 3 months later, out of the blue, I got a letter from DWP saying that they'd added the disability component to my (longstanding, but never paying out) tax credits award. So I was to receive £20 per month. 

    Anyway, things went really well with work last year and my income was £10,000 higher than most years, and they wrote at renewal saying that they had overpaid me the £20 per month and I owed them £228(ish). However, work is now back to normal, and my salary is back to normal. I don't expect them to continue paying my tax credits, but I'm not sure what happens with the overpayment if my salary has now dropped to marginally under the threshold and they aren't paying me anything.

    Then today, I found that they have paid me the cost of living £326 payment, and I have no idea at all if I should be entitled to it.

    Does anyone know what the criteria is for the £326? As in, if I had an active claim, but then they decide it was overpaid, what happens? I logged into my tax credits account and it just says "your claim will renew automatically". 


    It would have been a letter from HMRC for tax credits, not DWP.

    Tax credits

    To get the first Cost of Living Payment of £326, you must have been entitled, or later found to be entitled, for any day in the period 26 April 2022 to 25 May 2022 to:

    • a payment of tax credits
    • an annual award of at least £26 of tax credits
    If the overpayment meant you weren't entitled to the tax credits payments then you will likely need to repay back the £326.


  • peteuk
    peteuk Posts: 1,380 Forumite
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    This, for me, throws up a very interesting question.

    As I am sure you are aware, tax credit is paid on an estimation and then recalculated at the end of the financial year.   The fact that you only owe them £228 suggests they didn’t over pay you by much and I assume that you have an ongoing payment. Hence the COL payment. 

    My understanding is that overpayments are taken from the next years claim.  Again assuming you’ve got a claim for this year.   If you logged in and the TC is saying its automatic renewed then I assume they may have taken the income declared for last year.

    The bigger question is what happens should you be found to not have a claim for tax credits and the COL. 

    However there are a few holes in the story,  Furlough started March 2020 but you didn’t claim TC till 2021 (when) and what has happened to OH salary?
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  • Spoonie_Turtle
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    peteuk said:
    However there are a few holes in the story,  Furlough started March 2020 but you didn’t claim TC till 2021 (when) and what has happened to OH salary?
    From the post, it seems they had an old, open TC claim with no payments; DLA was claimed in 2021 which increased the award.
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