Deductions to repay debt

DWP can make deductions from UC payments in respect of repayments they are owed by the claimant, such as repayments for:

• budgeting loans and advances [1] (see Other benefits)

• universal credit advances [2]

• overpayments [3]

• financial penalties in suspected fraud cases where these are accepted by the applicant as an alternative to criminal prosecution [4]

• civil penalties imposed by DWP where an applicant has received an overpayment due to negligently providing incorrect information or failing to provide information without reasonable excuse. [5]

The level of the repayment amount(s) will normally be based on either repaying the debt within a certain time period, or at a certain percentage of the UC award. See DWP's Benefit overpayment recovery guide for details.

DWP can make deductions from universal credit and pay the amount to other creditors. [6] This is called a 'third party deduction'. A full list of payments in respect of which deductions can be made is given in guidance to DWP staff and includes arrears of: [7]

• housing costs (ie, payments towards mortgage interest charges)

• rent and service charges included in rent

• fuel costs

• council tax

• water charges.

DWP can make third party deductions in respect of a maximum of three different debts at one time, although more than one may be made for a particular type of debt. [8] Regulations lay out an order for 'ranking' debts by type and where there are more than three debts, deductions are made in respect of the three highest in that order. [9]

The overall amount that is deducted and paid to creditors will not normally exceed 40 per cent of the claimant's standard allowance. [10] However, where DWP judge that it is in the best interests of the claimant, deductions can be made in respect of debts of housing costs, fuel costs and rent (and service charges included in rent) which result in more than 40 per cent being deducted. On 16 October 2019, the DWP updated its guidance on debt and deductions from UC to specify that the maximum amount that can be deducted is the equivalent of 30 per cent of the claimant’s UC standard allowance, save as for the Last Resort Deductions (arrears of housing and fuel) and ongoing monthly costs for utilities (gas, electricity and water), where there are also arrears being repaid. [11] There are also limits on the amount which can be deducted from benefit and paid to creditors in respect of specific items, such as:

• five per cent of the claimant's standard allowance for arrears of housing costs [12]

• a minimum of 10 per cent and a maximum of 20 per cent of the standard allowance for arrears of rent and service charges [13]

• five percent of the standard allowance plus an estimated amount for current consumption where there are arrears of fuel (unless the claimant pays by other means such as a pre-payment meter) or water costs. [14]

If a claimant faces hardship because of a third party deduction, or the total level of third party deductions, the amount taken can be reduced. This is a decision for DWP to make in accordance with its own guidance. [15]

A third party deduction will be requested by the landlord or other creditor. The claimant's consent is not required except in some cases relating to fuel and water charges. [16] A government handbook on gov.uk explains how the system works.

Note that in some cases a claimant may face a third-party deduction in addition to a sanction or a deduction from benefit to repay DWP. This could result in her/him losing more than 40 per cent of her/his standard allowance although DWP have stated that where a person is facing a sanction of 40 per  cent of this amount or more, deductions will only be made in respect of mortgage arrears, owner-occupier service charges arrears, rent and service charges arrears, and arrears of fuel charges. [17]