The outstanding debt from overpayment of carers allowance rose to more than £250m last year, according to the government’s spending watchdog.

The National Audit Office (NAO) said the figure had increased by £100m since 2018/19.

The charity Carers UK said the report was “further evidence of a broken system that is failing unpaid carers”.

The government launched an independent review of overpayments in October after some carers were forced to pay thousands of pounds, leaving many facing financial hardship.

The Department for Work and Pensions (DWP) paid out £3.7 billion in care allowance to more than 900,000 claimants last year, the NAO reports.

If a person spends at least 35 hours a week caring for someone with an illness or disability they may be eligible for the allowance, which is currently £81.90 per week.

To qualify, one must not earn more than £151 per week. The limit will rise to £196 per week from April.

If a carer earns just one pound more than this figure there is no reduced rate and they are no longer eligible for any payments.

The NAO said this had created a “cliff-edge”, meaning significant overpayments could happen rapidly.

Claimants are required by law to inform DWP immediately if circumstances change.

But the department has faced criticism for failing to stop overpayments, despite its system reporting when a claimant is earning too much.

Some carers have told the BBC that they were unaware they had crossed the limit until they were informed years later, when the sum had reached thousands of pounds.

Last year the number of claimants earning more than the allowed limit accounted for 58% of new overpayment cases.

Other reasons for overpayment include the claimant no longer providing care, for example if the person being cared for has died.

Some 136,730 people were owed overpayments last year, an increase of 71% compared to 2018/19.

However, the NAO said the average value of new overpayments identified by the DWP had fallen over the past four years, suggesting they were being identified earlier.

The DWP seeks to recover overpayments of all benefits where it has a legal basis for doing so, unless this would cause financial hardship or is not cost effective.

If the department believes the overpayment was fraudulent, a case can also be referred for prosecution, which happened in 54 cases last year.

As an alternative, it may offer an “administrative penalty” of £350 or 50% of the overpayment, whichever is greater, up to a maximum of £5,000.

The number of administrative penalties has declined significantly in recent years, from 774 in 2018–19 to 75 in 2023–24.

Meanwhile, the use of £50 civil penalties has increased – 30,129 were imposed last year, a 50% increase on 2018-19.

The government-ordered review, which will look at how to reduce the risks of overpayments and how to support carers who have already taken up debt, is due to report by next summer.

Hannah Walker, chief executive of Carers UK, said any recommendations from the review should be implemented as quickly as possible.

Dominic Carter, director of policy and public affairs at the Carers Trust, called for a “complete overhaul” of the allowance system, describing it as “overly complex” and “outdated”.

Social Security and Disability Minister Sir Stephen Timms said: “This report sets out the scale of the challenge and underlines the importance of our independent review of overpayments so that we can make the system fairer for thousands of selfless carers.

“Carers deserve support, which is why we are raising the income threshold, which will benefit over 60,000 people, while our review gets to the bottom of the problem so we can protect carers from unfair debt and protect taxpayers’ cash. Can do.”