Nearly £12 million in benefit overpayments has reportedly been abandoned because recovering it could cost taxpayers even more. But that does not mean claimants can simply ignore a DWP repayment letter.
The Department for Work and Pensions has reportedly written off more than 645,000 benefit overpayments in just five years.
The reason may surprise many taxpayers: the debts were considered too small to be worth chasing.
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Figures obtained through Freedom of Information laws show that approximately £12 million in overpayments has been abandoned since 2021–22. The average amount written off was only around £18.50, but the sheer number of cases pushed the total into eight figures. The original report says 645,488 overpayment debts were forgiven.
The little-known £65 rule
DWP guidance contains a “Small Overpayment” limit for general benefit debts.
When an outstanding overpayment is £65 or less, the department may decide that applying its complete recovery process would cost more than the debt itself. In those circumstances, the entire amount can be written off.
This is an administrative decision based on value for money—not a reward or special debt-relief scheme for claimants.
The official DWP Benefit Overpayment Recovery Guide confirms that the current Small Overpayment limit is £65.
Does this mean every benefit debt below £65 disappears?
No—and this is where claimants need to be careful.
The £65 limit is a general operating rule, not a guarantee that every small overpayment will be cancelled. Important exceptions include:
- Overpayments arising from fraud
- Certain payments made after a claimant has died
- Social Fund overpayments
- Small amounts that can be combined with particular related overpayments
- Debts that were already referred for recovery before being reduced below £65
For payments made after death, a lower £25 threshold can apply because the recovery process is considered less expensive.
Claimants should therefore never assume a debt has been cancelled simply because it is below £65. Unless the DWP confirms otherwise, an official repayment notice should still be taken seriously.
Why would the Government abandon £12 million?
Attempting to collect a debt creates its own costs.
The DWP may need to identify the liable person, issue notices, manage calls and correspondence, set up repayments and potentially take enforcement action. Spending £30 or £40 in staff time and administration to recover a £10 debt would leave taxpayers worse off.
Viewed individually, writing off an average debt of £18.50 may be the cheaper option. Viewed collectively, however, cancelling hundreds of thousands of debts has produced an eye-catching total.
Around £2.3 million was reportedly written off each year through these small-overpayment decisions.
The figure is tiny compared with the wider problem
The £12 million total represents only a small part of the money lost through incorrect benefit payments.
Official DWP statistics estimate that £9.9 billion was overpaid because of fraud and error during the financial year ending in 2026. This included approximately:
- £6.8 billion attributed to fraud
- £1.85 billion attributed to claimant error
- £1.2 billion attributed to official error
The overall overpayment rate was 3.2% of benefit expenditure. The department also estimated £1.2 billion in underpayments during the same period. The full figures are published on GOV.UK.
The small debts covered by the £65 policy are generally outside the department’s headline recoverable-debt efforts.
What should you do if the DWP says you owe money?
Do not ignore the letter or stop a repayment yourself.
Check that the benefit, dates and amount shown are correct. If you believe the decision is wrong, follow the challenge or reconsideration instructions included in the notice.
If the debt is correct but the proposed repayment would cause financial hardship, contact DWP Debt Management. The department’s guidance says it may negotiate a more affordable repayment rate based on a person’s circumstances.
Most importantly, do not rely on the £65 limit as a loophole. Whether a small debt is written off depends on how it arose and whether recovery action has already begun.
The DWP did not accidentally lose track of 645,000 debts. It reportedly made a calculation that pursuing thousands of very small overpayments would cost the public more than writing them off.
That may be financially rational—but when those tiny sums add up to almost £12 million, the policy is certain to attract attention.
