The Department for Work and Pensions (DWP) is moving forward with new legislation that gives officials unprecedented powers to recover unpaid debts directly from individuals’ bank accounts. In a bid to crack down on benefit fraud and recover wrongful payments, ministers have clarified how much they can deduct—and under what conditions.
What’s Changing?
Under the new laws currently being debated in Parliament, DWP investigators will gain the authority to take money straight from a person’s bank account if they owe money to the department and are not repaying it. This marks a significant shift from current practices, which limit the DWP to deductions from benefit payments or wages through PAYE.
DWP Minister Andrew Western states that the department will enforce two main repayment methods: regular deductions or a single lump sum. However, these deductions won’t happen overnight, and individuals will receive advance notice before any money is taken.
How Much Can the DWP Take?
For regular repayments, there’s now a legal limit in place: the DWP can’t deduct more than 40% of the incoming funds into an account over the assessed three-month period. This “40% rule” is designed to prevent excessive deductions and bring these new powers in line with existing recovery rules.
However, lump sum deductions—where the full amount owed is taken in one go—don’t have a cap. Mr Western explained that the department would only use this method if the individual has “large available savings,” and officials must ensure that the deduction doesn’t lead to financial hardship.
Crucially, the DWP must assess at least three months of bank statements before taking any action, ensuring the funds are available and that the debtor—or their dependants—won’t suffer undue financial strain.
Who Will Be Affected?
The new powers specifically target people who owe the DWP money but are not on benefits and are not repaying their debts. According to government data, around 885,000 individuals fall into this category, collectively owing approximately £1.74 billion.
The proposed legislation will initially apply to claimants of Universal Credit, Pension Credit, and Employment and Support Allowance. However, the scope could expand to include other benefit types in the future.
Notice and Dispute Rights
Before any deductions are made, the DWP must provide a formal notice to the individual. This notice will:
- Identify the bank account involved
- Outline the amount to be recovered
- State the proposed terms of the deduction
- Invite the debtor to make representations
Debtors will have at least 28 days from the day after the notice is issued to respond and present their case. If they submit representations, the Secretary of State must review them and either uphold, modify, or cancel the deduction order.
Even if no response is received, the department must wait a further month after issuing the order before enforcing it—giving account holders another chance to request a review.
Discretion and Safeguards
Officials have been granted flexibility to adjust deduction amounts if a person’s financial situation changes—such as if their income drops or they begin receiving benefits. This aims to ensure fairness and avoid pushing people into financial crisis.
Mr Western reassured that while the department has stronger powers, they will use them judiciously. “We must be satisfied that neither lump sum nor regular deductions will cause hardship,” he said.
What’s Next?
While some critics argue these powers could be too invasive, supporters say they’re essential for reducing fraud and recovering taxpayers’ money. The legislation is still making its way through Parliament, and public and political scrutiny is likely to continue.
For now, individuals who owe money to the DWP should monitor official notices and consider engaging with the department early if contacted. With these new rules on the horizon, ignoring debts may no longer be an option.
Need support? If you’ve received a DWP debt notice and need advice, consider speaking to a debt charity or financial adviser. You may also contact the DWP directly to discuss repayment plans or dispute the claim.
FAQs
Q1. Can the DWP really take money directly from my bank account?
Yes, under new legislation currently progressing through Parliament, the DWP will be able to recover unpaid debts by directly withdrawing funds from bank accounts—if the individual is not repaying and not on benefits.
Q2. How much can the DWP deduct from my bank account?
For regular deductions, the DWP can take up to 40% of the funds entering your account over a three-month period. This rule prevents excessive withdrawals and aligns with existing recovery methods.
Q3. Is there a limit on how much the DWP can take in a lump sum?
No, there is currently no cap on lump sum deductions. However, the DWP must confirm that the individual has substantial savings and that the withdrawal won’t cause financial hardship.
Q4. Will I get any warning before the money is taken?
Yes, the DWP must give you at least 28 days’ notice before making any deductions. The notice will include details of the account, the amount to be recovered, and how you can dispute it.
Q5. Can I dispute the DWP’s deduction order?
Absolutely. You can submit your case within 28 days of receiving the notice. The Secretary of State must then review your representations and decide whether to uphold, amend, or cancel the deduction order.
Q6. What if I share my account with someone else?
The DWP must consider whether a deduction would negatively affect other account holders or dependants. Deductions cannot go ahead if they would cause hardship for others relying on the same account.
Q7. What if my financial situation changes after the deduction starts?
You can contact the DWP and request a reassessment. If your income changes or you start receiving benefits, officials have the discretion to reduce or pause the deductions.
Q8. Who is most likely to be affected by this rule?
People who owe money to the DWP but are not currently on benefits and have not been repaying their debts are most likely to be impacted. Around 885,000 such individuals are currently identified.
Q9. Will the DWP check my bank account without telling me?
The DWP will have power to request certain bank information to verify benefit eligibility. This includes checking income and savings but is separate from the direct deduction process, which requires notice.
Q10. What benefits are currently included under the new eligibility checks?
Initially, the DWP will apply these checks to claimants of Universal Credit, Pension Credit, and Employment and Support Allowance (ESA). The scope may expand in the future.
