Tens of thousands of people claiming benefits could soon see money they owe wiped clean or handed back to them.
The Department for Work and Pensions has launched a sweeping review that will examine hundreds of thousands of cases where claimants ended up owing money they never expected to owe.
Those affected are unpaid carers who look after family members or friends while also doing paid work on the side.
Many found themselves in debt to the government without ever realising they had done anything wrong.
The problem stems from official guidance that was unclear and did not properly explain the rules around how much carers could earn.
Now ministers are stepping in to fix what they describe as failures in the system they took over.
The Labour Government has confirmed it will look at more than 200,000 Carer's Allowance cases as part of this major exercise.
Around 25,000 people who provide unpaid care could have what they owe reduced or scrapped altogether, while some may get refunds for money they have already paid back.
The issue centres on guidance about earnings that varied from week to week, which was in place for a decade between 2015 and 2025.
This guidance failed to match what the law actually said about averaging out irregular pay.
Carers who balanced paid employment with at least 35 hours of weekly caring duties ended up going over the earnings threshold without knowing it.
Those affected do not need to do anything right now, as the DWP will contact them directly if further information is required.
Those affected are unpaid carers who look after family members or friends while also doing paid work on the side
| GETTYSecretary of State Pat McFadden said the government inherited a system that left unpaid carers accumulating debts through no fault of their own.
"That's why we accepted the vast majority of the Sayce Review's recommendations and are now getting to work implementing them, kicking off the reassessment exercise to review cases impacted by unclear guidance," he stated.
The minister emphasised that carers play a vital role in communities across the country.
He added: "We are committed to taking action to rebuild their trust."
The move follows ministers accepting 38 of the 40 recommendations put forward by the independent Sayce Review, which examined Carer's Allowance overpayments and published its findings in November 2025.
Around half of those recommended changes have already been put into practice.
The minister emphasised that carers play a vital role in communities across the country
| GETTYBetween April 2015 and September 2025, the official guidance on calculating earnings that went up and down from week to week did not properly reflect what the law actually required.
Carers who took on paid work while providing at least 35 hours of unpaid care each week found themselves unknowingly breaching the weekly earnings cap.
The rules around averaging out irregular pay were not explained clearly enough, leaving people unaware they had crossed the line. This meant busy carers built up debts to the government without any idea they had broken any rules.
The DWP holds most of the information needed to carry out these reviews, so affected carers should not contact the department themselves.
Officials will reach out if they need anything more.
Helen Walker, Chief Executive of Carers UK, welcomed the government's decisive action to address past failings and deliver the redress carers deserve.
"Carers UK has been campaigning on the issue of Carer's Allowance overpayments for more than seven years, and during that time we have heard from hundreds of carers who have experienced severe financial strain and emotional distress as a result," she said.
She noted that £75million was set aside in last year's Budget to tackle these wrongs
| GETTYKirsty McHugh, Chief Executive Officer of Carers Trust, praised the government's willingness to undo historic mistakes, saying it would have a huge impact on thousands of unpaid carers penalised through no fault of their own.
She noted that £75million was set aside in last year's Budget to tackle these wrongs.
Carers Trust will now help its network of 130 local services support affected carers as the review gets underway. The Government has also boosted the weekly earnings limit for Carer's Allowance, raising it to £204 net for the 2026/27 financial year.
This means some unpaid carers can now earn roughly £10,000 annually while still receiving the benefit. Ministers are looking into whether earnings calculations could be done automatically in future.
They are also considering replacing the current cliff-edge earnings rule with a tapered system, which would reduce the chances of overpayments happening again.
This week marks 50 years since Carer's Allowance was first introduced. The coming years are expected to bring some of the most significant changes to the benefit in its history. Free advice and support will be available from the DWP and partner organisations including Carers UK and Carers Trust.