29 May 2024

Carer's Allowance overpayments – what you need to know

A staggering 26,000 carers received overpayments in 2022-23

MPs and charities have called for an urgent overhaul of the Carer’s Allowance following revelations that thousands of carers have been forced to repay huge sums after unwittingly breaching earnings rules.

The findings prompted former Conservative Work and Pensions Secretary Sir Iain Duncan Smith to call for the Department for Work and Pensions (DWP) to investigate the issue in April.

Now the National Audit Office (NAO) - the government spending watchdog - has said it will investigate the growing scandal following requests from the work and pensions select committee and charity Carers UK.

Here Which? explains how Carer’s Allowance works, what the earnings rules are and the changes being called for.

What is Carer’s Allowance?

Carer's Allowance is a government benefit for people who are giving regular and substantial care to disabled people. The allowance is worth £81.90 a week for the 2024-25 tax year.

You must fulfil the following criteria to be eligible:

Spend at least 35 hours a week caring for someone who is receiving a qualifying disability benefit
Be 16 years old or over
Not be in full-time education

You cannot earn more than £151 per week after tax, National Insurance and certain expenses (in 2024-25).

Any Universal Credit (UC) you claim will be reduced pound for pound by any Carer’s Allowance you get, although carers can get additional money through the Carer Element of UC.

Find out more: Carer’s Allowance explained

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Why are people having to make repayments?

To qualify for Carer's Allowance, claimants can’t earn more than £151 per week after tax.

There’s currently no taper on this threshold, which means the income cap acts like a cliff edge – earning even £1 more makes you ineligible for the benefit.

If you breach this limit without realising it, and continue to receive the allowance, then the government will treat it as an overpayment and demand you repay the money.

Many recipients don’t realise that you cannot get the full amount of both Carer’s Allowance and your state pension at the same time. If your pension is £81.90 a week or more, you will not get a Carer’s Allowance payment.

Emily Holzhausen, director of policy and public affairs at Carers UK, said: ‘Carers often say they have made the mistake unwittingly; they don’t realise a small pay rise or Christmas bonus has taken them over the limit. Many are also paid irregularly, making it hard for them to work out their overall income.’

It could take carers on a low income years or even decades to pay off. As of February 2023, the DWP said it was seeking to recover 145,567 overpayments of Carer's Allowance.

Find out more: Universal Credit – carer element

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What changes are being called for?

Two former DWP ministers have now called for the government to pause the repayment demands, including Duncan Smith, who said: ‘The best thing is for the DWP now to pause these demands and review carefully what was behind all of this to make sure these are not mistakes by the DWP but are genuinely about individuals failing to notify the department.’

The National Audit Office (NAO) has since announced it will investigate the growing scandal following requests from the work and pensions select committee and Carers UK. The government spending watchdog said its intervention was triggered by public and political concerns over the mounting human and financial costs of Carer’s Allowance overpayments.

The NAO’s intervention comes almost exactly five years after the watchdog published a critical inquiry report highlighting serial failures by the DWP to tackle carer’s allowance overpayments.

In response to the ongoing scandal, the DWP recently announced an enhanced notification strategy which would 'explore the use of targeted text messages or emails to alert claimants and encourage them to contact the department when the DWP is made aware of a potential overpayment'.

Meanwhile, Carers UK has launched a manifesto calling on all political parties to ‘commit to a new social contract for unpaid carers’.

The manifesto includes a number of calls that the charity claims will reduce the penalties carers face, such as being plunged into poverty, having to give up paid employment and experiencing poor and broken physical and mental health.

The calls include:

Raise Carer’s Allowance by at least £11.10 a week in England and Wales.
Increase the earnings limit for Carer’s Allowance to the value of 21 hours work a week at the National Living Wage rate and define this link in law so carers’ ability to earn is not eroded over time.
Reform the eligibility rules for Carer’s Allowance – giving access to a lower rate of benefit for those caring between 20 and 35 hours a week and enabling more than one person to receive the benefit if multiple people are caring for the same person.
Provide additional financial support to carers of state pension age, including a new, non-means-tested payment. There should also be a review of pension rules for carers.
Modernise and digitise the delivery of Carer’s Allowance to make it less complicated for claimants, to protect carers from overpayments and to allow for much faster adjustments to recipients’ payments.
Make the NHS the most carer-friendly in the world and by building in new responsibilities to recognise unpaid carers’ health and promote their wellbeing.

Holzhausen added: ‘There’s not a moment to lose for reform, carers have been waiting far too long for this. Their support for older, disabled and ill relatives and friends is worth billions every year. They need and deserve better.’