Government to reassess Carer’s Allowance overpayments
5 mins read
Tuesday 25 November 2025
Updated Wednesday 26 November.
Following the long-awaited findings of an independent review into Carer’s Allowance overpayments, the government has promised to overhaul and modernise the system used for assessing a carer’s earnings and to reassess historic overpayments.
What has the independent review concluded?
The Sayce review found that large numbers of carers were left facing huge overpayments because of the Department for Work and Pension’s (DWPs) own failures. This has had a very profound impact on many families, causing widespread financial and emotional distress.
The report, commissioned by the Secretary of State for Work and Pensions, confirms that in very many cases, overpayments were caused not by any failure on the part of individual carers. Rather, DWP’s own systems caused problems.
The complexity and inconsistency in the DWP’s own rules for calculating earnings left many claimants in a situation where they may have known there was an earnings limit, but had no way of identifying whether they were exceeding it or what exactly they needed to report. Flawed guidance on averaging earnings only made problem worse. So did systemic delays in the DWP acting on information provided by HMRC about individual carers earnings.
The Sayce review findings reflect Contact’s own research. We found that of those we surveyed getting Carer’s Allowance, 1 in 10 had been overpaid. On average they had to repay the benefits office £1,045. A quarter of families told us they had contacted the Carer’s Allowance unit about changes in their wages, but the information wasn’t updated in time. Half of families with a disabled child who had had to pay back Carer’s Allowance told us they stopped claiming the benefit as a result. This is despite Carer’s Allowance being a vital source of income for carers under enormous physical, emotional and financial pressure.
Government commits to reassessment exercise
This government has committed to carrying out “a reassessment exercise”. This will look again at Carer’s Allowance overpayments caused by averaging of earnings between 2015 and 2025.
Where an overpayment decision resulted from flawed DWP guidance, it will reduce the amount of that carer’s overpayment accordingly. It will also pay back any overpayments it should not have pursued in the first place.
This reassessment exercise won’t start until 2026, and the government will provide more detailed information in the New Year. However, it has already made clear that it will only re-examine overpayments linked to averaging of earnings, and not other issues such as the treatment of expenses.
Government to implement majority of report’s recommendations
The government has also said that it will implement the vast majority of recommendations in the independent review. In addition to the reassessment exercise, this will include:
- Changing the rules used to calculate a carer’s average earnings. The government says that internal DWP internal guidance has already been amended to improve consistency and clarity in the rules and to ensure that they better reflect modern working patterns. However, it will also consider the need for changes to the averaging regulations themselves.
- Simplify allowable expenses. The DWP will review decision letters to ensure claimants better understand which expenses they can deduct from their earnings.
- Address the earnings cliff edge whereby someone loses all of their Carer’s Allowance if they go over the earnings limit by just 1p. The government has said that it will look at the possibility of introducing a taper. This would mean the amount of Carer’s Allowance paid is reduced gradually as earnings increase. However, it warns that such a change would be ‘several years away’.
- Smooth interactions between Carer’s Allowance and Universal Credit. The government accepts that where a carer gets both Carer’s Allowance and Universal Credit, any Carer’s Allowance overpayment should be offset against Universal Credit arrears. However, this change is not likely to begin until 2027/2028 at the earliest.
- Use data more effectively. The DWP says that it will clear backlogs in acting on earnings alerts from HMRC, respond to 100% of alerts, and act on alerts much more quickly.
- Improve DWP processes and communications. The DWP has committed to improving communications with carers, including letters and gov.uk guidance. Existing online services for carers are also to be improved.
- Reform enforcement actions. The government partially accepts the recommendation that no one should be issued with a civil penalty for not telling one part of the DWP when they have already told another part.
- Improve debt management for carer’s allowance overpayments taking more account of hardship and vulnerability.
- Rebuild trust by appointing a senior responsible owner within the DWP. However, it has rejected the need to commission an operational audit.
We urge the government to move fast
Anna Bird, Chief Executive at Contact, said:
“We welcome this comprehensive review recognising the harm that has been caused to carers up and down the country from the fundamentally flawed Carers’ Allowance overpayment system. And we welcome the government’s commitment to implementing the vast majority of the review’s recommendations to improve it.
“We urge the government to move fast to look at the tapering of the earnings limit. This would make a huge difference to the parents we support juggling work and caring responsibilities.”
Looking for more information about Carers Allowance?
You can find lots of information and advice about Carer’s Allowance on our website.
