Being in debt can be stressful but having the money you owe forcibly taken from your wages through a Direct Earnings Attachment is enough to take anyone by surprise.
This can happen for a number of reasons but usually happens when you’ve been overpaid benefits or tax credits.
What is a Direct Earnings Attachment?
A Direct Earnings Attachment (DEA) is used by the Department of Work and Pensions (DWP) or HM Revenue & Customs (HMRC) to recover debt amassed through tax credit or benefit overpayments. It can also be used by local authorities for housing benefit overpayments.
Direct Earnings Attachments differ from other debt solutions and court orders in that instead of repaying the debt you owe in instalments, the money is taken directly from your wages.
DEAs can be issued by DWP Debt Management, which is part of the DWP, when someone:
- Owes the DWP money
- Is not currently receiving benefits
- Hasn’t volunteered to repay the money
Unlike other forms of debt recovery, the DWP doesn’t require a court order to issue a DEA.
They are also considered non-priority arrestments which means, if any other earnings orders are in place, a DEA will give way to allow it to take priority.
Student loans also take priority over DEAs.
How does a Direct Earnings Attachment work?
If you have been overpaid benefits or tax credits, you will receive a letter or email letting you know when you can expect the overpayment to be taken directly from your wages.
This will usually be the next time you get paid.
Your employer will also be sent details of your DEA and will be requested to start making monthly deductions from their employee’s earnings within 22 days.
They are responsible for sending the money directly to the DWP, HMRC, or local authority, depending on what the overpayment was for.
Being told that money will be taken from your wages can be scary but you will always be informed of a DEA before it happens to give you time to request to pay the amount due in instalments instead.
What earnings can be included in a Direct Earnings Attachment?
There are some rules surrounding what can and can’t be included as earnings in a DEA.
The following payments can be classed as earnings for a DEA:
- Income (including bonuses and overtime)
- Occupational pensions (if paid with wages or salary)
- Compensation payments
- Statutory Sick Pay
- Fees and commission
What earnings can’t be included in a Direct Earnings Attachment?
The following payments can’t be classed as earnings for a DEA:
- Any payments received from the government (benefits, pensions, or credits)
- Statutory Maternity Pay
- Statutory Adoption Pay
- Ordinary/Additional Paternity Pay
- Statutory Redundancy Pay
- Guaranteed Minimum Pension
- Allowances from HM Forces (except allowances for members of the reserve force)
How much can be taken in a Direct Earnings Attachment?
There is no set amount that is automatically deducted from your wages with a DEA. The DWP, or HMRC, will choose from one of three rates and inform your employer of which rate they must apply:
If the DEA is applied at the standard rate, up to 20% of your salary will go towards your DEA.
For example, if you earn between £430.01 and £690 a month, a 3% deduction rate will apply. If you earn £2240 or more a month, a 20% deduction rate will apply.
If the DEA is applied at the higher rate, up to 40% of your salary can be deducted and put towards your DEA.
This works out at about 5% for monthly earnings up to £430 and 40% for monthly earnings over £2240.
In rare circumstances, a fixed rate may be applied. If you are experiencing financial hardship, you can contact the DWP or HMRC to ask if they can set a fixed rate below the standard or higher rate or remove the DEA altogether to allow you to pay in monthly instalments.
However, it is important to note that 40% is the legal maximum that can be deducted from an employee’s net earnings for a DEA and you should never be left with less than 60% of your net income after income tax, National Insurance, and workplace pension contributions. This is known as your protected earnings.
Can I stop a Direct Earnings Attachment?
Receiving a DEA can be daunting but there are steps you can take to stop it from happening before any money is taken from your wages.
The best way to stop a DEA in its tracks is to contact the DWP or HMRC as soon as possible and agree to pay the money through weekly or monthly instalments, for example, through a Debt Management Plan (DMP) based on what you can afford until the total amount is repaid.
When you do this, you must demonstrate how much you can comfortably afford to pay towards the debt by completing a budget form.
The DWP or HMRC also have the power to reduce your weekly or monthly payments if you are struggling to afford them or if they are causing you further financial hardship.
However, if you reach out to the DWP or HMRC when it’s too late or after the DEA has begun, they are unlikely to agree as they are already getting the money directly from your wages.
Can I have a DEA alongside an IVA?
Benefit overpayments shouldn’t be recovered through a DEA while you are in a formal debt solution, such as an Individual Voluntary Arrangement (IVA).
This is according to the DWP’s Benefit Overpayment Recovery Guide.
In Scotland, the DWP will avoid recovering benefit overpayments if you are in an active Debt Arrangement Scheme (DAS) and the debt was included in the DAS.
Once a formal debt solution has started, any ongoing DEAs must also be lifted and refunds must be issued if payments continue after this date.