Does Council Tax Reduction Affect Universal Credit?

According to Universal Credit statistics, 29 April 2013 to 8 July 2021 there were approximately 5.9 million claimants of Universal Credit in July 2021, out of which 53 per cent were women.

However, since the introduction of this benefit up until 2018, the proportion of men claiming this benefit was much higher than women. The reason for this is perhaps due to the fact that Universal Credit applies to people age individuals with no children.

With the recent change to the very structure of this benefit and the fact that it has replaced some other state benefits including Income Support and Child Tax Credit, there appear to be more women claiming Universal Credit since 2018.

Does Council Tax Reduction Affect Universal Credit?

If there are changes in the amount of Universal Credit that you are eligible for and these changes bring you into a different income band, there may be a change to the amount of council tax reduction that you qualify for. similarly, if you are no longer eligible for Universal Credit, you may lose your discount on council tax bills as well.

Local council authorities take into account the income bands of residents to apply a discounted rate of council tax on individuals who are either unemployed or on a low income. Therefore, individuals’ incomes (including benefits such as Universal Credit) are taken into account by local authorities when designing a council tax reduction plan for claimants.

Generally speaking, if someone is on Universal Credit, they may be eligible for a maximum discount of 82.5 per cent on their council tax bills and will be required to pay 17.5 per cent of the total amount. This is still a major financial relief for those struggling to find or maintain a medium to a high-income job.

To learn more about this topic we will explore the following areas through this article:

What Is Universal Credit?
Who Is Eligible For Universal Credit?
Who Is Eligible For Council Tax Benefits?
How Do I Know If I Am Entitled To An Income Based Council Tax Benefit?
How Do I Work Out My Council Tax Benefit?

What Is Universal Credit?

Universal Credit is a state benefit for UK citizens above the age of 18 and below state pension age. It aims to provide financial assistance to individuals who are either out of work or on a low income. It is a monthly payment that claimants receive to help them to cover living costs.

Universal Credit has replaced six benefits, referred to as the “legacy benefits” by serving a single payment for households and helping them meet housing and childcare costs. These include:

Income Support
Income-related Employment and Support Allowance (ESA)
Income-based Jobseeker’s Allowance (JSA)
Housing Benefit
Child Tax Credit
Working Tax Credit

Additionally, it provides support for health conditions, disabilities or the role of a carer that prevent claimants from working full time or working at all.

Who Is Eligible For Universal Credit?

To qualify for Universal Credit, claimants must be able to fulfil the below eligibility criteria:

aged between 18 (in some cases it may be 16 or 17) and state pension age
unemployed or on low income
between the claimant and their partner, total savings are less than £6,000
experiencing high costs for child care
suffering from a disability or health condition
caring for someone else

The amount of Universal Credit that an individual receives depends on their personal circumstances and income (if any). For instance, someone who is single and younger than 25 years of age will be eligible for Universal Credit amounting to around £257 per month. Meanwhile, this amount will rise to around £509 for someone who is living with a partner and either one of them or both of them are above the age of 25.

Learn more about benefits that you may qualify for by using the Benefits calculators

Who Is Eligible For Council Tax Benefits?

To qualify for a council tax benefit the general rule is that individuals above the age of 18 are eligible to pay as long as they own or rent a home. However, certain criteria need to be met to qualify for council tax benefits as well as the amount of benefit that one may qualify for.

Two adults who live in the same house qualify to pay full council tax; they may share the bill. However, if there is a single adult living in a property by themselves, they may be eligible for a 25 per cent reduction in the bill irrespective of the fact whether they are part-time employees or full-time ones. The same rule applies if an adult is sharing the premises with one or more individuals under the age of 18 years.

A 50 per cent council tax benefit becomes applicable if all the residents of the household are under 18 years of age. Complete exemption or a 100 per cent discount is applicable if all the residents of the said premises are full-time students.

Individuals on a low income or those receiving other forms of public support qualify for a 100 per cent discount on their council tax bills. To apply for this exemption, claimants may be homeowners or tenants; they may either be unemployed or working. Variation in homeowner and employment does not cancel out eligibility for council tax benefit; however, the amount that one is eligible for may vary. To learn more about benefits for individuals on a low income, click here Browse: Benefits and financial support if you’re on a low income – GOV.UK (www.gov.uk)

To apply for a council tax benefit, click here Apply for Council Tax Reduction – GOV.UK (www.gov.uk )

How Do I Know If I Am Entitled To An Income Based Council Tax Benefit?

While an online benefits calculator Benefit Calculator (eden.gov.uk) may prove to be useful in calculating council tax, it may also help claimants know the criteria that may apply to their specific circumstances. These relate to certain demographic data including the number of children per household and the age bracket that claimants belong to.

A household without children:

Single individuals between the ages of 18-24 may be eligible for a council tax reduction of between £153 to £200; depending on the band they are eligible for (bands vary from A to D). Meanwhile, couples belonging to the same category will be eligible for a reduction of £243 to £306 in their council tax bills; depending on their assigned band.

As an individual’s age bracket increase from over 25 to over state pension age, eligibility for increased benefits also increases. Singles aged 25-state pension credit age may be eligible for a council tax reduction of between £169 to £216.

A household with children:

A single parent with a child qualifies for a £255 council tax benefit and as age brackets and bands increase the discount may rise up to £419.

On the other hand, a couple with a single child qualifies for a £329 council tax benefit and as age brackets and bands increase the discount may rise up to £561.

To learn more about age and income-based council tax bands, this link may be helpful Are you entitled to a council tax reduction? (eden.gov.uk)

How Do I Work Out My Council Tax Benefit?

To work out your council tax benefit, you need to gather/calculate information regarding the following three main areas:

the valuation band your property located in England, Scotland, or Wales belongs to.
the amount charged by your local council as per their council tax scheme.
whether or not you qualify for a discount on your council tax bill.

You can learn about your council tax band online by connecting to this link Working out your Council Tax

Conclusion:

Even though Universal Credit and Council Tax are managed under separate authorities and are not linked directly to each other, local councils do take into account any benefits or incomes that claimants of council tax reduction discounts are in receipt of by coordinating with the Department of Work and Pensions. Also, if someone loses their claim on Universal Credit, they will also lose the council tax reduction that was in lieu of it (which is usually a discount of 82.5 per cent)

FAQs: Does Council Tax Reduction Affect Universal Credit?

How much is council tax reduction on Universal Credit?

Council tax reduction on Universal Credit depends upon the claimants household income and the income band that they belong to, as per the Council Tax Reduction Scheme. For instance, an individual with a weekly income (inclusive of Universal Credit) between £0 to £142.99 will get a 100 per cent discount on their council tax bill. The percentage of discount keeps falling as incomes rise to a 25 per cent council tax discount on a household income between £310 and £402.99.

Are Universal Credit and council tax linked?

While Universal Credit and Council Tax are managed by two separate departments and are not directly linked. However, when local councils take into consideration the claim of a council tax reduction claimant, they will take their incomes from wages and benefits into account. Therefore, the higher the incomes, the lower the discount on claimants council tax bills.

Is council tax reduction a benefit?

Yes, council tax reduction is a benefit extended towards individuals who are on low income, unemployed or claiming other benefits to pay their bills.

Why does my Universal Credit say 0 this month?

If this happens without prior notice from the Department for Work and Pensions, it may be a system error that can be easily rectified by informing the concerned authorities. Otherwise, it is possible that the claimant has lost eligibility for Universal Credit and also missed any communication that was sent via the loc l council office to inform of this change.

How much is council tax in the UK?

Council tax is based upon the property valuation bands assigned by the Valuation Office Agency and local council authorities. These eight bands range between A to H with Band A indicating the lowest valued property. However, Band D is considered to be the average band; the council tax set for this band during 2021-22 is £1, 898. This is a 4 per cent increase from the previous term.