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If you’re currently in work and have received benefits overpayments, you may have heard of Direct Earnings Attachments (DEAs), which allow the authorities to deduct money directly from your earned income via your employer.
In this guide, we’ll explain in more detail what a Direct Earnings Attachment is, how it’s applied if you owe money to HMRC or local authorities, and how you can protect yourself from DEA deductions.
A direct earnings attachment (DEA) is an order made by a local authority which authorises HM Revenue and Customs (HMRC) or the Department for Work and Pensions (DWP) to collect money directly from a debtor’s earned wages.
This step is usually taken if the debtor has previously been overpaid benefits and is currently in gainful employment.
A DEA enables the government to get in touch with your employer, take control of the repayment schedule, and earn their money back over a timeline that suits them, although the debtor will be made aware of the Direct Earnings Attachment and the proposed payment schedule in advance of the first payment being taken.
If you’ve received a Direct Earnings Attachment, it’s because you’ve received benefit overpayments – in other words, you’ve been paid money you weren’t due by HMRC, the Department for Work and Pensions (DWP), or your local authority.
This can happen if a person has overestimated their income or expenses, their circumstances have changed without them telling the relevant authority, or an error was made by the department.
Benefit overpayments that might be collected via a DEA include:
A Deduction from Earnings Attachment (DEA) will be taken out of your earnings each month if you are in work and you have been overpaid in benefits like Universal Credit or tax credits.
If a DEA is applied to you, your employer will collect your national insurance number and receive payment instructions from the relevant authority.
The employer is responsible for making the deductions from their employee’s earnings, which they will then pay to either the Department for Work & pensions (DWP), HM revenue & Customs (HMRC), or the local authority.
You’ll get a letter informing you about the DEA but there may be a way to avoid it by agreeing to make regular payments yourself, or repay what you owe in full straight away.
It’s important to know that a direct earnings attachment shouldn’t leave you in a position where you are financially vulnerable.
That’s why HMRC or your local authority won’t be able to touch your wages beyond a certain point.
Under a DEA, deductions will be taken from an employee’s net earnings – the earnings you’re left with after taxes, pensions, and other automatic deductions.
The protected earnings limit ensures that a DEA should never reduce your net earnings to less than 60% of their total.
If you find yourself falling below that threshold, you can apply for a partial DEA reduction to take you back to the protected earnings limit.
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A DEA might be applied to the following kinds of income:
The following types of income will not be affected by a Direct Earnings Attachment:
When employers learn that one of their employees has a debt to the Department for Work and Pensions (DWP), they have 22 days to initiate a Direct Earning Attachment payment plan.
To ensure timely repayment, all payments must be received by the 19th day of each month following the first deduction taken from an employee’s pay.
DEA deductions will be taken from the debtor’s pay for as long as it takes for the benefit overpayments to be repaid in full.
A Direct Earnings Attachment is a non-priority arrestment, meaning if another type of arrestment such as an Attachment of Earnings Order (England, Wales, and Northern Ireland) or an Earnings Arrestment (Scotland) must take precedence.
That’s not to say more than one earnings attachment can’t be in effect at the same time; however it’s essential to remember the protected earnings rule, which guarantees that you should never make less than 60% of your net salary as a result of an earnings attachment.
If you’re currently under an earnings arrestment, and a further arrestment would take you below the 60% threshold, then the new arrestment cannot be applied.
If you owe money to HMRC, the DWP, or your local authority, there are several options available to help you manage your debt effectively.
An Individual Voluntary Arrangement, or IVA, is the most popular debt management solution in the UK.
An IVA allows you to combine all of your unsecured debts, including debts to HMRC and other government bodies, and pay towards it using one affordable monthly payment.
At the end of your payment term (usually five or six years) any debt leftover will be written off.
A Trust Deed is generally considered as the Scottish answer to an IVA. Like an IVA, a Trust Deed allows you to turn your unsecured debts into a single monthly payment, and enables you to write off debts at the end of your payment term.
The major difference between a Trust Deed and an IVA is that the Trust Deed payment term tends to last four years, as opposed to five or six years for an IVA.
If you’re worried about money owed to HMRC or your local authority and you would like to deal with the debt that’s hanging over you, we can help.
At IVA Plan, we’re specialists in IVAs and other debt solutions. Our team of debt experts can provide you with all the advice and information you need to make an informed decision on your finances and help you get your life back on track.
For debt advice you can trust, get in touch with the team at IVA Plan today.
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