The horror of DWP benefit deductions exposed in new report from Martin Lewis charity

For too many people relying on Universal Credit, the harsh reality of benefit overpayments is pushing them further into financial ruin and damaging their mental health. Recent research from the Money and Mental Health Policy Institute reveals that when the Department for Work and Pensions (DWP) demands repayment, it often deducts as much as 15% of a claimant’s monthly benefits—up to £60 for a single adult.

This heavy-handed approach leaves vulnerable individuals struggling just to eat, with one participant admitting that:

some days I have been not eating because I can’t afford to, which is leaving my mental health in tatters.

DWP deductions: another scourge affecting claimants

Official figures confirm the scale of the problem with these deductions.

In the financial year ending 2024, the DWP overpaid more than £6.4 billion in Universal Credit. Commercial lenders must secure court orders before taking money from someone’s income—a process that can take months. However, the government swiftly claws back these funds directly from claimants’ payments, often without adequate warning or consultation.

The research found that those affected are rarely informed about their repayment options. Plus, even when they do manage to negotiate a plan, the DWP still takes an immediate first payment that many simply cannot afford.

This unyielding strategy echoes the infamous carers’ allowance scandal, where unpaid carers were prosecuted for supposedly fraudulent claims after trying to report part-time work earnings.

The devastating toll on claimants’ finances and wellbeing is clear: many are plunged into deeper hardship, struggling to cover essentials once the deductions begin. One mother was told she owed £17,000 due to overpaid carers’ elements, which she had not been aware of for three years. Another was falsely accused of owing nearly £28,000.

Yet these are not isolated incidents but part of a wider pattern of aggressive debt recovery that punishes already struggling people.

A growing problem – with growing alarm over it

There is growing alarm about the DWP’s approach. More than a million people owe money due to benefit overpayments, and many experience severe mental health challenges as a result of the relentless debt chasing.

The Money and Mental Health Policy Institute warns that current procedures resemble past policy failures and calls for urgent reform. Instead of punitive deductions, claimants should be given fair opportunities to negotiate manageable repayment plans—and crucially, be protected from deductions while those negotiations are underway.

Critics argue that the government’s new powers, proposed under the Public Authorities (Fraud, Error and Recovery) Bill, will make matters worse.

This legislation would let the DWP directly withdraw money from former claimants’ bank accounts or wages without a court order—a drastic step that risks exacerbating financial distress among those who may no longer be on benefits but still face residual debt. This level of intrusion and enforcement goes far beyond what commercial lenders must follow and fails to consider the real-life hardship imposed on claimants.

While the DWP claims it works to block incorrect payments—reportedly saving billions and protecting claimants from falling into debt—these savings and efficiencies come at a human cost.

The system’s errors are often the DWP’s fault, with recent analysis showing that government mistakes account for £111 million annually in unfair deductions. Citizens Advice has highlighted that over two million households, including millions of children, receive less income than they should because of these deductions.

The DWP is punitive – and it knows it

It is evident that the current policy amounts to punishing vulnerable people twice: first by overpaying incorrectly, and then by ruthlessly reclaiming those sums without adequate safeguards or empathy. The official Benefit Overpayment Recovery Guide states that repayments can be waived if they would cause excessive harm, supported by medical evidence—but such exceptions are poorly communicated and poorly implemented, leaving many claimants trapped in a cycle of debt and despair.

Campaigners urge the DWP not only to halt these aggressive measures but to overhaul the system entirely.

Instead of driving people into destitution, the DWP should prioritise fairness, transparency, and support, giving claimants genuine choice and dignity.

As one representative from the Money and Mental Health Policy Institute stated, the government must:

proactively give people a real chance to negotiate a payment plan that they can actually afford, instead of just taking money out of people’s income with barely any warning.

For countless disabled people, single parents, and non-working people relying on benefits, this is not just about money—it’s about survival, mental health, and being treated with basic humanity in a system that too often fails them.

Featured image via the Canary