In recent months, there has been growing concern over the Department for Work and Pensions (DWP) issuing substantial repayment demands to benefits claimants, particularly those receiving Carer’s Allowance. These cases have highlighted the strict eligibility conditions and the “cliff-edge” nature of certain benefits, where even minor oversights can lead to significant financial consequences. With the total amount of outstanding Carer’s Allowance overpayment debt rising to £250 million in 2023-24, up from £150 million in 2018-19, this issue affects thousands of families across the UK.
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The Case That Spotlighted the Issue
One of the most alarming cases to come to public attention involves Oksana Shahar, a dedicated carer for her son who also works part-time to support her family. Oksana received a shocking letter from the DWP demanding repayment of £10,000 in Carer’s Allowance. The reason? She had exceeded the earnings threshold by just £1.92. This tiny margin triggered a substantial repayment demand that accumulated over six years without any prior warning.
Her partner Guy, aged 53 and founder of the charity Transforming Autism, described the letter as “surreal and outrageous,” highlighting the devastating financial impact such demands can have on families already under pressure. What makes this case particularly troubling is that the DWP did not provide any early warnings about the accumulating overpayment, leading to a situation where a minor oversight resulted in a five-figure debt.
Understanding Carer’s Allowance and Its Strict Earnings Limit
Carer’s Allowance is designed to provide financial support to individuals who care for someone with substantial needs for at least 35 hours per week. As of 2025/26, the benefit pays £83.30 per week to eligible carers.
One of the key eligibility conditions for Carer’s Allowance is the earnings limit. From April 7, 2025, carers must not earn more than £196 per week after allowable deductions to qualify for the benefit. This represents a significant increase from the previous limit of £151 per week, following recent changes announced in the Budget.
Allowable Deductions from Earnings
When calculating earnings for Carer’s Allowance purposes, several deductions can be made from gross weekly earnings:
| Allowable Deductions | Description |
|---|---|
| Income Tax | Amounts paid toward personal income tax |
| National Insurance | Contributions made to National Insurance |
| Pension Contributions | Half of any contributions to work or personal pensions |
| Care Costs | Costs for care of the disabled person or children while working (subject to conditions) |
| Work Expenses | Costs that are necessary for work (e.g., specialist equipment, travel) |
It’s crucial to understand these deductions as they can help carers stay under the earnings threshold and maintain their eligibility for the benefit.
The “Cliff-Edge” Problem
One of the most problematic aspects of Carer’s Allowance is what experts describe as the “cliff-edge” nature of the benefit. Unlike some other benefits that reduce gradually as income increases, Carer’s Allowance operates on an all-or-nothing basis. If a carer exceeds the earnings threshold by even £1, they lose entitlement to the entire benefit amount.
Helen Walker, Chief Executive of Carers UK, has described this system as unforgiving and in need of reform:
“The current system creates a cliff-edge where even a tiny error can lead to huge consequences. Families who are already under immense pressure shouldn’t be punished like this.”
This cliff-edge design can lead to substantial overpayments that accumulate over time, particularly when carers are unaware they have exceeded the threshold or when their earnings fluctuate close to the limit.
How Overpayments Occur and Escalate
Overpayments of Carer’s Allowance typically occur in the following circumstances:
- Exceeding the earnings threshold: According to DWP data, 58% of new overpayment cases in 2023-24 related to claimants having earnings over the permitted limit.
- Failure to notify changes promptly: Claimants have a responsibility to inform the DWP when their circumstances change, but many are unaware of this requirement or don’t realize they’ve exceeded the threshold.
- Delayed detection: The DWP’s systems may not immediately detect when a claimant exceeds the earnings threshold, leading to overpayments accumulating over extended periods before being identified.
- Insufficient monitoring and alerts: Until recently, the DWP did not have robust systems in place to alert claimants when they were approaching or exceeding the earnings threshold.
In 2018, the DWP introduced the Verify Earnings and Pensions Service (VEPS), which uses earnings information from HM Revenue & Customs (HMRC) to identify potential overpayments. However, the department has only investigated around half of the VEPS cases identified, and many overpayments continued to build up undetected.
Government Response and Ongoing Review
In response to growing concerns, the government has taken several steps to address the issue of Carer’s Allowance overpayments:
Independent Review
An independent review of Carer’s Allowance overpayments was announced in October 2024 and is being led by Liz Sayce OBE. This review aims to investigate:
- The causes of earnings-related overpayments
- How the DWP can improve its systems to prevent overpayments
- What support can be provided to those who have already accrued overpayments
The review is expected to deliver its findings and recommendations by Summer 2025. You can find more information about the review on the official government website: https://www.gov.uk/government/news/next-steps-on-addressing-carers-allowance-overpayments-announced
Increased Earnings Threshold
In a positive development for carers, the government announced an increase to the Carer’s Allowance earnings threshold in the recent Budget. From April 2025, the threshold will rise from £151 to £196 per week, which is expected to benefit more than 60,000 carers by 2029/30.
Minister for Social Security and Disability, Sir Stephen Timms MP, stated: “Carers wishing to pursue more financial independence should be encouraged to do so and not be unknowingly punished. We need to get to the bottom of what has been going on.”
Improvements in Communication
The DWP has committed to improving its communication with claimants, including the introduction of text alerts when it’s time for claimants to report income updates. This measure aims to reduce unintentional breaches of the earnings limit in the future.
What to Do If You Face an Overpayment Demand
If you receive a letter from the DWP stating that you have been overpaid Carer’s Allowance, it’s important to take action promptly:
1. Check the details
Carefully review the overpayment notice to verify whether the information is correct. Gather payslips, bank statements, and any correspondence with the DWP to check against the details in the letter.
2. Seek advice
Contact organizations that can provide specialized advice:
- Citizens Advice: https://www.citizensadvice.org.uk/
- Carers UK: https://www.carersuk.org/
- National Debtline: https://www.nationaldebtline.org/
3. Appeal or challenge the decision
If you believe the overpayment decision is incorrect, you can:
- Request a mandatory reconsideration within one month of the decision
- Appeal to an independent tribunal if the reconsideration is unsuccessful
Information on how to challenge a decision is available on the GOV.UK website: https://www.gov.uk/appeal-benefit-decision
4. Discuss repayment options
If the overpayment is valid, contact the DWP to discuss repayment options:
- Agree on affordable repayment rates based on your financial situation
- Request flexibility if you’re facing financial hardship
The DWP typically recovers overpayments through deductions from ongoing benefits or through direct repayment arrangements if you’re no longer receiving benefits.
Preventative Measures for Carer’s Allowance Recipients
To avoid finding yourself in a similar situation, consider these preventative measures:
1. Monitor your earnings carefully
- Keep detailed records of all income and hours worked
- Be particularly vigilant if your earnings fluctuate or are close to the threshold
- Use the Carer’s Allowance Calculator on GOV.UK to check your eligibility: https://www.gov.uk/carers-allowance-calculator
2. Report changes promptly
- Notify the Carer’s Allowance Unit immediately of any changes to your income or circumstances
- Don’t assume that telling one department of the DWP or HMRC means all departments will know
- Keep records of all communications with the DWP
3. Understand your deductions
- Make sure you’re accounting for all allowable deductions when calculating your earnings
- Seek advice if you’re unsure about what can be deducted
4. Request regular benefit checks
- Consider requesting an annual benefit check to ensure your entitlements are correct
- Organizations like Carers UK can help with benefit checks: https://www.carersuk.org/help-and-advice/financial-support/
Wider Implications and Calls for Reform
The issue of Carer’s Allowance overpayments has raised broader questions about the design and administration of the benefit system. Advocacy groups and MPs have called for significant reforms:
Proposed Reforms
- Introducing a taper rate: Replace the cliff-edge with a gradual reduction of benefits as earnings increase
- Improved monitoring systems: Develop early warning systems to alert claimants when they approach the earnings threshold
- More flexible earnings calculations: Consider averaging earnings over longer periods to accommodate fluctuating incomes
- Enhanced guidance and support: Provide clearer information to claimants about their responsibilities and entitlements
The Work and Pensions Committee has conducted evidence sessions on this issue, and the National Audit Office (NAO) has highlighted concerns about the administration of Carer’s Allowance. The NAO reported that the total outstanding Carer’s Allowance overpayment debt reached £250 million in 2023-24, indicating the scale of the problem. For more information, see the NAO press release: https://www.nao.org.uk/press-releases/carers-allowance-overpayment-debt-reaches-250-million/
The Human Cost
Beyond the financial implications, cases like Oksana’s highlight the significant human cost of the current system. Carers already face substantial pressures, including:
- Reduced earning potential due to caring responsibilities
- Physical and emotional strain from providing care
- Limited opportunities for career advancement or personal development
- Financial insecurity and anxiety
Adding the stress of unexpected benefit repayments can have serious consequences for the wellbeing of carers and, by extension, those they care for. The anxiety caused by large debt notices and the potential long-term financial impact can exacerbate already challenging situations.
Conclusion
The case of Oksana Shahar and others like her serves as a stark reminder of the challenges faced by carers navigating the benefits system. The strict “cliff-edge” design of Carer’s Allowance, combined with limited monitoring and communication, has led to significant overpayments that place additional burdens on those already providing vital unpaid care.
While the government’s recent actions—including the increased earnings threshold and the independent review—are positive steps, they come too late for many carers already facing substantial repayment demands. Comprehensive reform of the system is needed to ensure that those providing essential care receive the support they need without facing disproportionate penalties for minor oversights.
For carers currently receiving Carer’s Allowance, vigilance is essential. Carefully monitoring earnings, promptly reporting changes, and seeking advice when needed can help prevent the accumulation of overpayments and the distress that follows.
In the meantime, those facing repayment demands should remember that support is available through various organizations, and flexible repayment options can be negotiated with the DWP to minimize the impact on their financial wellbeing.
Frequently Asked Questions
What should I do if I accidentally exceed the Carer’s Allowance earnings limit?
If you realize you’ve exceeded the earnings limit, contact the Carer’s Allowance Unit immediately at 0800 731 0297. Report the change in your circumstances and provide details of your earnings. Keep records of all communications, including dates, times, and what was discussed. The sooner you report the issue, the sooner the DWP can adjust your claim and prevent further overpayments from accumulating.
Can I challenge a DWP overpayment decision?
Yes, you can challenge an overpayment decision if you believe it’s incorrect or unfair. First, request a mandatory reconsideration within one month of the decision. If unsuccessful, you can appeal to an independent tribunal. You may also have grounds to challenge if the DWP failed to act on information you provided about changes in your circumstances or if there was an official error. For advice on challenging decisions, contact Citizens Advice or visit www.gov.uk/appeal-benefit-decision.
How will the DWP recover overpayments, and can I negotiate the repayment terms?
The DWP typically recovers overpayments through deductions from ongoing benefits or through direct repayment arrangements. Standard deduction rates apply, but you can negotiate lower rates if the standard deductions would cause financial hardship. Contact the Debt Management line at 0800 916 0647 to discuss your situation. You’ll need to provide details of your income, expenses, and any other debts to demonstrate what you can reasonably afford to repay. The DWP should consider your circumstances and agree to an affordable repayment plan.
