Guidance

A9/2025 Housing Benefit debt recovered by the Department for Work and Pensions' Debt Management

Updated 30 September 2025

Who should read

All Housing Benefit colleagues and wider if appropriate.

Action

For information.

Subject

Housing Benefit debt recovered by the Department for Work and Pensions’ Debt Management.

Guidance Manual

The information in this circular does not affect the content of the HB Guidance Manual.

Queries

For queries about the:

• technical content of this circular, contact lawelfare.lasupport@dwp.gov.uk
• distribution of this circular, contact lawelfare.correspondence@dwp.gov.uk 

Extra copies of this circular and copies of previous circulars can be found at Housing Benefit for local authorities: adjudication circulars.

Crown Copyright 2025.

Recipients may freely reproduce this circular.

Introduction

1. The Department for Work and Pensions’ (DWP) Debt Management recover Housing Benefit (HB) debts on behalf of local authorities (LAs) from claimants who are in receipt of certain prescribed benefits when the LAs have been unable to recover from ongoing HB. 

2. In 2016 the processes used for referral and management of HB debt were enhanced to create a technical solution to what was a manual process. The project for this was known as the Payment Deduction Programme (PDP) and the use of this name has largely remained within the LA community since that time. However, within Debt Management it is not a name which has been used for several years. Therefore, going forward, the processes used for referral and management of HB debt will formally be known as HB debt recovered by DWP’s Debt Management.

3. This circular builds on lessons learnt and questions asked since 2016 and replaces circular HB A7/2022. This circular has also been placed on Glasscubes.

Housing Benefit debt

4. HB debt can be recovered from Universal Credit (UC) and non-UC benefits as outlined in Annex A.  

5. LAs retain ownership of the HB debt and the DWP Debt Manager System (DMS) will manage recovery of the debt and forward any deductions of benefit to LAs.

Exchange of data interfaces

6. Each process covered by the exchange of data between LAs and Debt Management are known as interfaces: 

• LA referrals of outstanding HB debt (referrals)
• LA notifications of revised LA debt balances to Debt Management, either an increase or decrease (revisions)
• the recall of debts by LAs (recalls)
• the return of debts by Debt Management to LAs (cessations)
• the automated issue of the payment schedule and payment of HB debt deductions from Debt Management to LAs (payment schedules)

Referrals process

7. Before making a referral LAs must check the Customer Information System (CIS) through Searchlight to ensure a DWP benefit is in payment. For UC claimants, LAs should ensure an award with a start date (and no end date) has been recorded in the award screen to avoid referrals being returned unnecessarily. 

8. Each LA will refer relevant HB debt(s) to DMS through the automated HB debt referral interface.  

9. If an LA uses a third-party DMS, they may be required to move the HB debt back into their HB processing system to enable the referral to interact with the interface. The LAs IT software supplier will have provided guidance on this. 

10. Referral data will be sent to DMS as a batch file once a day or as often as the LA determines. Do note, only one type of each interface file can be sent each day otherwise files will be overridden. In other words, if a referral file is created in the morning, then a second referral file cannot be sent in the afternoon, using the same date, as this will override the morning file. The consequence being DMS only receives one referral file from the LA for that day.  

11. DMS will accept up to five HB debt referrals at any one time for UC claimants. DMS will continue to only accept one HB debt referral at a time for non-UC claimants. Debt referrals will be returned immediately if the numbers are exceeded.  

12. Debt balances must be classified as either fraud or non-fraud and can consist of a single debt or multiple debts per invoice/unique reference number (created at the same time) but must be of the same classification.  

13. Recovery of HB fraud debts will take priority over HB non-fraud debts. Debts will be held in DMS and recovered in chronological order according to the date DMS received the debt. However, if an LA recalls a debt and then subsequently re-refers the debt, it will then go to the back of any queue for recovery unless it is a fraud debt.  

14. At the point of referral LAs will not receive confirmation the debt has been accepted by DMS. LAs should therefore assume, the debt has been accepted unless they receive a return notification for one of the reasons listed in the return of debts (cessation) section. 

15. When an HB debt is referred to Debt Management it is loaded onto the DMS for consideration of recovery from a claimant’s benefit. When recovery is implemented, deductions are taken from a claimant’s benefit. This could be weekly, fortnightly, four weekly or monthly dependent on the benefit type and claimant circumstances.

Revisions process

16. Following an HB debt referral, an LA can revise the balance or classification of a debt they want Debt Management to collect through the interface. 

17. The temporary clerical revision workaround for MRI (formerly Capita) and Civica IT software supplier sites is no longer in place. All LAs must now revise a debt through the automated revision interface.   

18. Revisions are only be used in a small number of scenarios:  

• the claimant has had their entitlement reviewed or has won an appeal; this changes the amount of the HB debt originally created

• further circumstances come to light, which means for the period of the overpayment the entitlement was less and, therefore, the amount of the HB debt needs to be increased

• the LA has a credit from the claimants rent account or Council Tax account which they consider can be off set against the HB debt

• the claimant has a second debt with the same classification and the LA IT software system is unable to produce a referral file

• the claimant pays a one-off amount to the LA towards their debt:  

  • if a claimant makes direct contact with an LA to make a payment against an outstanding HB debt held by Debt Management, the claimant should be advised to contact Debt Management - in exceptional cases the LA can accept a payment and a revision must be sent through the interface as soon as possible to ensure accurate accounting

  • if the payment clears the debt in full, the LA must recall that debt from Debt Management before applying any payment to their systems and not revise the debt balance to £0.00

Recalls

19. An LA has the option to recall the HB debt at any time, for example, the LA has decided to take their own recovery action. However, LAs should consider: 

• UC claimants: if the LA decides to re-refer this debt at a later stage, it could then affect when the debt will go into recovery. This is because recoveries are made in chronological order according to the date the referral was received by DMS. If this becomes the sixth non-fraud debt to be received by DMS it would automatically be returned to the LA 

• non-UC claimants: it is also possible any re-referral will be immediately returned as another HB debt could have been received by Debt Management or other recovery activity could have started

20. LAs are reminded, if the claimant has an insolvency order/debt relief order they need to recall the HB debt from Debt Management (if it has not already been returned by Debt Management), to avoid deductions being taken whilst a moratorium is in place. 

21. LAs will receive a notification through the interface of any recalled debts (cessation file) and need to be aware there is a holding period during which any unallocated monies can be transacted. This is to ensure the accurate debt balance is returned to the LA in:  

• up to 5 days for UC

• up to 14 days for non-UC benefits

22. If an LA recalls a debt and then decides it needs to re-refer the debt, consideration must be taken to check the balance which was returned on the cessation file and the payment schedule covering the month the debt was returned. This will ensure the correct outstanding HB debt balance is returned. We have seen many examples where a debt is recalled and then re-referred for the full amount within days, when there is a deduction waiting to be processed through the payment schedule which would reduce the amount to be re-referred.  

23. If you are unable to recall a debt using the automated file, you can contact the Debt Centre and ask them to action a manual recall to return the debt to your LA.

Cessations

24. HB debts can be returned by Debt Management to LAs through the interface for a number of reasons.

For UC claimants:

• a CIS broadcast is received notifying Debt Management the UC claim has ceased 

• at the end of the Assessment period for claimants when an award ceases 

• the claimant dies 

• Debt Management receives a recall from the LA 

• a claimant becomes insolvent 

• a 100% benefit sanction is imposed for 13 weeks or more 

• the sixth debt of the same classification has been received, or if the sixth debt received is fraud and at least one of the five debts held is non-fraud, the last received non-fraud debt will be returned to the LA

For non-UC claimants:

• a CIS broadcast is received notifying Debt Management the claim has ceased 

• the claimant dies 

• Debt Management receives a recall from the LA 

• a claimant becomes insolvent 

• a 100% benefit sanction is imposed for 13 weeks or more 

• Debt Management will only accept one HB debt at any one time and will return a new referral of an HB debt if there is already an LA debt held, or other ongoing DWP debt recovery is currently in place which is due to last more than 28 days 

• there are three missed instalments and no other prescribed benefit in payment  

• Debt Management determines there is insufficient benefit to make a recovery - this is where the benefit award is small and deductions for HB and DWP debts cannot be set as this would contravene the rules which require a minimum amount of benefit to remain in payment  

• Debt Management determines the maximum deductions are already in place - this is where Third Party Deductions such as court fines or utility are already in place and any other deduction for HB or DWP debts would exceed the maximum amount which can be recovered from an individual’s benefit

25. The cessation file will contain the balance held on DMS at the time of the cessation.

Payment schedules

26. DMS will issue LAs with a schedule of deductions summarising recoveries made on an individual case basis via the automated interface. Debt Management will continue to send monthly payments to LAs through BACS (Bankers Automated Clearing Services). 

27. For DWP non-UC benefit deductions Debt Management will set up an instalment plan to take deductions at a set rate and periodicity (according to benefit pay dates). 

28. For UC, there is no fixed instalment plan. The amount of deduction is determined each month according to existing deductions priority order (see Annex B). LAs should also be aware that: 

• UC is paid monthly in arrears 

• UC is income based so the award can fluctuate each month as earnings/income rise and fall 

• deductions will be taken from available UC up to a maximum 15% of the award, according to the priority order 

• UC will hold up to five HB debts at any time, which will be recovered in order of referral received date and classification. If the five debts held are the same classification, then payment credits to the oldest debt. If there is a mixture of fraud and non-fraud classified debts, the oldest fraud debt based on referral received date is recovered first, before the recovery of non-fraud debts 

• in partnership cases where both claimants have their own individual HB debts then recovery is apportioned equally if they are both the same classification. If one of the debts is classified as fraud, then this would be prioritised and recovered first  

• it is possible the total amount recovered from UC for HB debts within any given assessment period could be spread over more than one HB debt. This is because the amount available exceeded the balance of the first HB debt allowing recovery to commence on the next. LAs must be aware, there may be instances where small value payments could be made because of this scenario. 

Note: LAs should not raise queries regarding UC claimants relating to when deductions will start and the value of the deductions as this is impossible to predict for the reasons listed above.

29. Where there is sufficient UC available to recover debts in priority order, the amount deducted from UC will be allocated equally between DWP, tax credits and the HB debt held by Debt Management.

Example:

A £60 monthly deduction would allocate £20 to each of the DWP, HM Revenue & Customs (HMRC) and the LA debts concurrently, to reduce the balance of each by an equal amount if they are all the same classification.

30. Due to data protection policy, Debt Management is only able to discuss debt currently in repayment with the LA owning the debt.

31. By exception, Debt Management may override the deduction rate following an affordability request from the claimant. Claimants contacting the LA with an affordability request must be directed to Debt Management who will consider and action the request.

32. The deductions taken in any one calendar month (from the first to last day) are paid to the LA in the month following the deduction. For example:

• a monthly deduction from a claimant’s UC payment, credited to DMS on 5 June, will be paid to the LA the following month (July) 

• fortnightly deductions from a claimant’s Employment Support Allowance/Jobseekers Allowance, credited to DMS on the 5 and 19 September, will be paid as one payment to the LA in the following month (October).

33. LAs will receive the payments and supporting HB payment schedules by the 3rd Friday of the month after the recovery from the claimant’s benefit (usually between the 15th and 21st of the month, in exceptional circumstance it could be the 4th Friday in a month (22nd).

34. If an LA has a query about their payment schedule and/or amount paid into their bank account, then these queries only should be directed to debt.accountingandfinance@dwp.gov.uk.

Transfer of files

35. Transfer Your Files (TYF) is used to transfer HB debt files to and from the LA to DMS. Five specific file types are used to manage the recovery of HB debt. These are: 

• referrals, revisions and recalls (from the LA to Debt Management) 

• cessations and monthly payment schedules (from Debt Management to the LA)

36. LA IT software suppliers developed solutions which create the HB debt files for referrals, revisions and recalls individually in ‘.xml’ format. The files are then compressed into a single ‘.tar’ file which LAs upload to TYF once a day as appropriate. Note: Your LA IT software supplier should have provided you with detailed guidance and instructions on the creation, compression and uploading of the compressed ‘.tar’ files. 

37. Each file type can only be uploaded once per day, unless they have different dates, otherwise it will overwrite the earlier file that day.  

38. The cessations and monthly schedule are then generated by DMS in ‘.xml’ format and placed in appropriate LA Message Queues within TYF and provided as compressed ‘.tar’ files. LAs must ensure these are downloaded daily and processed. These files are only available from TYF for a maximum of 30 days.

File format

39. This section will describe the file naming conventions for files which are     transmitted between LAs and DMS through TYF. 

40. File names for referral, revision and recall files:

Referral

File	Format (Creation Date-Message Type-LAID)	Suffix
Referral	YYYYMMDD-LAREF-AAAAAA	.xml

‘YYYYMMDD’ is the creation date of the file.

‘LAREF’ identifies the file as a referral file.

‘AAAAAA’ is the LA ID.

41. Example file name: 20151118-LAREF-005920.xml  

In this example the Batch ID for this file which would be contained within the header information of the file would be: 20151118-LAREF-005920.

Revision

File	Format (Creation Date-Message Type-LAID)	Suffix
Revision	YYYYMMDD-LAREV-AAAAAA	.xml

‘YYYYMMDD’ is the creation date of the file.

‘LAREV’ identifies the file as a revision file.

‘AAAAAA’ is the LA ID.

42. Example file name: 20151118-LAREV-005920.xml 

In this example the Batch ID for this file which would be contained within the header information of the file would be: 20151118-LAREV-005920.

Recall

File	Format (Creation Date-Message Type-LAID)	Suffix
Revision	YYYYMMDD-LAREC-AAAAAA	.xml

‘YYYYMMDD’ is the creation date of the file.

‘LAREC’ identifies the file as a recall file.

‘AAAAAA’ is the LA ID.

43. Example file name: 20151118-LAREC-005920.xml

In this example the Batch ID for this file which would be contained within the header information of the file would be: 20151118-LAREC-005920.

File names for ‘.tar’ files

44. Any referral, revision or recall files produced for a particular day will be zipped into a ‘.tar’ file. 

45. If there are no referral, revision or recall files produced by an LA for a particular day then no ‘.tar’ file will be produced.

LA to TYF ‘.tar’ files

File	Format (Creation Date-Message Type-LAID)	Suffix
A tar file containing any Referral, Revision and Recall files generated that day from an LA.	YYYYMMDD-PDPLA-AAAAAA	.tar

‘YYYYMMDD’ is the creation date of the file.

‘PDPLA’ identifies the file as a tar file containing referral, revision and recall files generated by an LA for a particular day.

‘AAAAAA’ is the LA ID.

46. Example file name: 20151118-PDPLA-005920.tar

File failure

47. Any ‘.xml’ files failing DMS validation for non-quality reasons will be returned to the LA for corrective action. If one non-quality referral is identified within the .xml file, the whole file containing multiple claimant referrals will fail. Subsequent errors within the file will not be identified until the file is re-submitted, which could result in the file being returned on multiple occasions. It is therefore within LAs best interest to ensure the quality and accuracy of the data before making a referral. 

48. Once a referral has been made, if the file fails validation within DMS, the LA Security and Support Team (LASST) will notify the LA that the ‘.xml’ file has failed. The LA should then take the following steps: 

• retrieve the failed ‘.xml’ file from their IT system 

• amend any incorrect record contained within the .xml file 

• upload the corrected ‘.xml’ file to TYF (for DMS validation). 

49. During this period any revision or recall files submitted which contain records relating to the debts within the failed file will also fail validation. This will continue until the original referral file is corrected and validated by DMS.  

50. In addition to non-quality issues ‘.xml’ files will fail if they become corrupted, when this occurs the file will be displayed as successfully uploaded in TYF. However, Debt Management will be unable to open the file as an ‘.xml’ file. Investigations suggest such faults primarily occur when a user at the LA has attempted to manually alter the ‘.xml’ file before uploading it onto TYF. Where the ‘.xml’ file is corrupted Debt Management will not be able to indicate the reason for the corruption. When viewed with a browser, corrupted files fail to display as ‘.xml’ with only the raw data visible. In all instances LASST will return the failed file to the LA, who will be responsible for raising an incident or support call with their LA IT software supplier. Following corrective action by the LA IT software supplier and/or the LA, these files will be required to be uploaded again to TYF. (Note: no duplicate file will be generated by DWP as the original will not have been processed).

Over recovery

51. If an HB debt becomes over recovered, the following examples show the action which should be taken in each scenario.

Example 1:

Where an LA accepts a payment from a claimant and the HB debt has already been recovered in full, it is the LA’s responsibility to provide a refund to the claimant providing the LA has not sent a revision causing a credit balance. Debt Management will manage any credit balance and refund to the claimant.

Example 2:

Where an LA accepts a payment from the claimant prior to Debt Management having made the final payment to the LA and no other debt is held, Debt Management manage any credit balance and refund to the claimant.

Example 3:

Where an LA accepts a payment from the claimant prior to Debt Management having made the final payment to the LA and there are other outstanding debt(s), Debt Management apply the revision to the HB debt, manage any credit balance and adjustments to other debts.

Example 4:

Where an LA receives payments resulting in a credit balance solely because DWP has recovered too much then it is DWPs responsibility to manage any credit balance and refund to the claimant.

Cases in credit but not through over recovery

52. Evidence and feedback from LAs show the HB Debt Recovered by DWP’s Debt Management referrals can, at times, develop into a credit situation. In other words, there appears to be an over-recovery on the individual case.  

53. Sometimes DMS makes the right deduction from the claimant but instead of apportioning the repayment between different debt types it sometimes credits only one of the debts. This then potentially makes one debt type appear over recovered when in fact the credit needs to be reallocated from one debt and credited to another, not affecting the claimant. These are reported to Debt Agents to address and recall excess payments from LAs where appropriate.

Example:

The claimant has an HB debt, a UC debt, and a tax credit debt. A deduction of £60 from the current benefit payment is made and should credit 3 x £20 to each of the debt types. But a system fault means the whole £60 is credited to the HB debt. When the agent looks at the exception report, they will correct this by recalling £40 from the LA and posting 2 x £20 credits to the other debt types.

LA query process

54. For queries regarding individual debts, LAs should call the Debt Centre on 0800 916 0647. The busiest times for Debt Management are Mondays and Fridays as these are peak calling times for customers. Debt Management has not put any limit on the number of queries LAs can raise at one time. However, this may change at any given time depending on how busy the network is at the time the call is made. Note: There is no email address to use to resolve HB debt queries, the only contact route is to phone the Debt Centre. 

55. The Performance Development Team has also identified that the current LA query process with the Debt Centre is not always sufficient for LAs to resolve intricate queries regarding individual debts. We have been working closely with Debt Management to ensure LA queries are suitably resolved and the current process has been enhanced as follows.  

56. For queries regarding individual debts: 

• LAs should call the Debt Centre on 0800 916 0647 and advise the Debt Management Agent the nature of their query 

• the agent will make every effort to answer the LA query in the first instance 

• if the agent is unable to resolve the query, the agent will advise the LA and escalate the query to a dedicated team 

• the LA must give the agent an email address in order for the escalation team to contact the LA 

• on receipt of the escalation, the dedicated team will contact the LA within 7 days upon receipt to resolve the query 

• once the query has been resolved the escalation route will close for that individual case 

• for any new queries, LAs must start at the beginning of the process by calling the Debt Centre on the number given above

57. Debt Management agents cannot advise on when debt recovery will start, how much it will be and when is it ending for individual UC cases. This is due to the fluctuating nature of UC and is determined by the circumstances of each case at the time of payment.  

58. If an LA has a query regarding the HB debt deductions payment schedule and associated total payment or bank details, email debt.accountingandfinance@dwp.gov.uk  

59. LA should contact LASST by email at lawelfare.lasupport@dwp.gov.uk or telephone 03000 920103 for any issues regarding:  

• technical or TYF connectivity  

• non-receipt of files  

• uploading or downloading files to and from TYF

Service Level Agreement

60. The updated Service Level Agreement (for both the financial years ending March 2025 and 2026) is held on Glasscubes.

Annex A

DWP benefits that deductions for HB can be taken from for UC and non-UC benefits

• Income Support  

• Attendance Allowance  

• Jobseeker’s Allowance (JSA) and JSA New Style  

• Employment & Support Allowance (ESA) and ESA New Style  

• Disability Living Allowance (care component only)  

• Incapacity Benefit  

• Industrial Death Benefit   

• Carers Allowance  

• Maternity Allowance   

• New State Pension 

• Retirement Pension  

• Severe Disablement Allowance  

• Pension Credit  

• Bereavement Benefits   

• Bereavement Allowances  

• Personal Independence Payment

Annex B

Priority of deductions from UC

Note: All % rates are of the claimant/benefit unit’s UC Standard Allowance 

The Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 Schedule 6 prescribes what deductions may be made from a prescribed benefit and what payments may be paid direct to third parties. It also details the maximum amount deductible and the order of priority. 

The maximum amount that can be deducted in Legislation from UC is an amount equivalent to 40%. However, as a matter of policy from October 2019, this was restricted to 30% of the claimant’s UC Standard Allowance. From April 2021 this was restricted to 25%. From April 2025 this is restricted to 15%.

There are two exceptions to this: 

• deductions for normal consumption of utilities do not count towards the 15% maximum

• if a sanction or penalty is being applied, priority deductions, for example housing and fuel costs, are still taken even if the total amount of deductions is higher than the 15%

Order of priority

1. Fraud Penalties
2. Conditionality Sanctions
3. Short term advances (Universal Credit Advance: new claim or change of circumstances)
4. Flat Rate Maintenance
5. First month advance (Universal Credit Advance: benefit transfer)
6. Budgeting Advance
7. Owner/occupier service charge arrears (where the lender is not part of the MID (Mortgage Interest Direct) scheme)
8. Rent and/or service charges arrears (minimum deduction rate of 10%)
9. Gas arrears (electricity arrears can come above gas arrears, if required)
10. Electricity arrears
11. Council Tax or Community Charge arrears
12. Fines or compensation orders
13. Water charges arrears
14. Social Fund loans
15. Recoverable Hardship Payments
16. HB and DWP Administrative Penalties
17. HB, tax credit and DWP fraud overpayments
18. HB and DWP Civil Penalties
19. HB, tax credit and DWP normal overpayments
20. Integration Loan arrears
21. Eligible Loan arrears
22. Rent and/or service charge arrears (maximum deduction rate of no less than 10% and no more than 20%)

The sub-order rules are: 

a. Categories 16 or 18 - where there are debt balances for both DWP and LA debt to be recovered in the same category then the deduction is split equally between the 2 debt owners, for example 50% to DWP debt and 50% to LA debt. 

b. Categories 17 or 19 - where there are debt balances for more than one of DWP, LA or HMRC debt to be recovered in the same category then the deduction is split equally between the 2 or 3 owners. 

c. Categories 1 to 5 or 15 to 19 - subject to the priority order in 1 to 23 and (a) and (b) above, where the recovery is through a deduction from a joint UC claim then the recovery is allocated to DWP joint debt ahead of any DWP single debt.

Maximum deduction rates 

Third Party Deductions are deducted at an amount equivalent to between 5% to 15% of the claimant’s UC Standard Allowance. If required, a deduction is also taken for ongoing consumption of gas, electricity and water, which are deductible at variable rates dependant on the claimant’s usage. 

Fines are recovered at 5% of the UC Standard Allowance. Any other deductions being taken reduce the maximum deduction rate pound for pound, so that the total of all deductions does not go above the overall maximum deduction rate of 15% of the claimant’s UC Standard Allowance. 

Flat Rate Maintenance is deducted at a set rate. Currently the set rate for the 2003 scheme is £5 a week (£21.67 a month). For the 2012 scheme this is £7 a week and in addition to this there is a 20% collection charge making that payment £8.40 a week (£36.40 a month). For the 1993 scheme the set rate is £7.20, but where the charge is made through benefit as a third-party deduction, the amount taken is restricted to 5% of the claimant’s standard allowance. A claimant can have a percentage of their applicable set rate deducted if they have joint responsibility for a child. 

Social Fund loans continue to be recovered at the rate that was last agreed with the claimant. 

The maximum deduction rate for Recoverable Hardship Payments, Administrative Penalties, Fraud Penalties and Sanctions and Fraud overpayments is an amount equivalent to 40% of the claimant’s UC Standard Allowance, but this is restricted to an amount equivalent to 15% as a matter of policy. 

The maximum deduction rate for Civil Penalties and Ordinary Overpayments is an amount equivalent to 15% of the claimant’s UC Standard Allowance.