This blog answers the question “What is classed as low income for council tax reduction?” It clarifies those bases and clears out the term “low income” for the purpose of council tax.

What is classed as low income for council tax reduction?

Various elements determine what is classed as low income for council tax reduction. It depends upon your residence status, whether you live alone or with children, whether you have dependents or earning adults living with you, the size of your property, whether you are paid weekly or monthly, etc. 

Classes of persons

Council tax is a function assigned to individual councils, and the specifics of it are something that vary from council to council. But a broad categorisation finds that the classification as of low income for council tax, though varies in the monetary value, has a similar categorisation of taxpayers, in order to determine this monetary value. 

Broadly, these classes of persons are:

  • Pensioners with income not greater than the applicable amount
  • Pensioners with income greater than the applicable amount
  • Working-age persons with income less than the applicable amount
  • Working-age persons with income more than the applicable amount
  • Persons who are not pensioners, and are a part of polygamous marriages
  • Persons who are not pensioners, who have an award of Universal credit
  • Pensioners living with non-dependants
  • Persons who are not pensioners, living with non-dependants

Applicable Amount

The term applicable amount mentioned above is what is taken as the basis to determine council tax. This applicable amount is an aggregate of several monetary sources.

These, broadly include:

  • Income or earning
  • Capital
  • Income and capital of your partner
  • Personal allowance
  • Family and other premiums
  • Tax credit
  • Universal credit award
  • Deductions from universal credit
  • Retirement pension
  • Income from annuity contracts
  • War disablement, or widow’s or widower’s pension
  • Guaranteed income payment
  • Other social security benefits
  • Any military, naval or Armed forces’ payment
  • Maintenance payment
  • Any kind of royalties
  • Rent payment
  • Any other government schemes

This list is not an exhaustive list, and it is not a fixed list. These are some of the widely categorised examples of what may be considered while classing low income for council tax. Specifically, this depends upon every individual council, and the list provided thereby.

This list can be found out by searching your council through entering your postcode at the official website and finding out your local council. If you don’t know your postcode, then you can do so by entering your address here

Westminster council tax scheme

As an example to make you understand, the classification, income range and discounts of Westminster Council are discussed below. 

The regulations of the council classifies taxpayers into three main classes of person to whom a reduction may apply. It details the amount of the reduction that applies, the amount of reduction according to it, and calculation of this amount.

These classes are: 

  • Class 1 – it encomapsses all persons whose income falls below their applicable amount. They are entitled to a 100% reduction from any appropriate non-dependant deductions.
  • Class 2 – this class covers all those persons whose income exceeds their applicable amount. They are entitled to their full liability minus 20% of the difference between their income and their applicable amount and any appropriate non-dependant deductions.
  • Class 3 – this applies to all those persons who have at least one second adult living with them. These people are entitled to a reduction of 25%, 15% or 7.5% of the council tax liability depending on the circumstances of the second adult.

 

Coming to the classification of income as “low income” and the reductions based upon that, it is divided and subdivided into several categories.

The first category is that of people Aged 18 and over and working for at least 16 hours per week, or receiving universal credit (UC) and working for at least 16 hours per week. The low income classification here is made by weekly income ranges and limits.

These weekly incomes and the respective reductions applicable are:

  • For people with gross income <£217.00, deduction is  £4.05
  • For people whose gross income is between £217.00 and £376.99, the deduction rate is £8.30. 
  • For people whose gross income is between £377.00 and £468.99, the deduction rate is £10.40.
  • For people with their gross income more than £469.00, the deduction rate is £12.45.

The next category is that of people not working for at least 16 hours per week. 

Under this category, the deduction rate of following subcategories is nil:

  • People receiving universal credit with no earned income
  • People receiving income support
  • People receiving income-based jobseekers allowance 
  • People receiving an income-related employment and support allowance
  • Anyone less than 18 years of age, no matter their income
  • People receiving pension credit
  • Full-time students

All the other people who work for less than 16 hours a week, but do not fall under any of the above mentioned categories receive support at the deduction rate of £4.05.

Next is for people of working age:

  • If they are single and,
    • Aged less than 25, the deduction rate is £59.20
    • Aged between 25 to pensionable age, the deduction rate is £74.70
    • Have less than 25 years age, but are recipient of ESA main phase, the deduction rate is £74.70
  • If he or she is a lone parent,
    • And is more than 18 years old, but less than the pensionable age, the deduction rate is £74.70
  • If they are a couple,
    • And either one or both if them have age more than 18 and less than pensionable age, the deduction rate is £117.40
  • If they are polygamous partners,
    • For each partner, the deduction rate is £42.70
  • If they receive dependants allowance,
    • For a child aged under 16, the deduction rate is £68.69
    • For a young person aged between 16 and 19 years, the deduction rate is £68.60
  • If they receive family premium,
    • The normal rate is £17.65
    • The lone parent rate in  protected cases is £22.20
  • If they receive a disability premium and,
    • They are single or lone parent, below pensionable age, the deduction rate is £35.10
    • They are a couple, both of whom are aged below the pensionable age, the deduction rate is £50.05
  • If they receive enhanced disability premium, and if,
    • They are a Single/Lone parent aged below pensionable age, the deduction rate is £17.20 
    • They are a couple both aged below pensionable age, the deduction rate is £24.60
    • It is a child, the deduction rate is £26.67
  • If they receive severe disability premium, and if,
    • They are a single or a lone parent, the deduction rate is £67.30
    • They are a couple where one of them qualifies for the premium, the deduction rate is £67.30
    • They are a couple and both of them qualify for premium, the deduction rate is £134.60
  • If they receive a disabled child premium,
    • For each disabled child, the deduction rate is £65.94
  • If they receive a carer premium,
    • For each claimant, or each partner, the deduction rate is £37.70
  • If they receive Employment and Support Allowance,
    • For work related activity component, the deduction rate is £29.70
    • For support component, the deduction rate is £39.40

Calculating council tax support

For this first of all you need to calculate excess income, which is equal to the applicable amount, that has been detailed out above minus (-) actual income.

Upon this, the council tax support is calculated using the following formula:

Daily CT liability minus non-dependant deductions in receipt of IS/JSA(IB)/ESA(IR) or in low paid work minus 20% of the excess income Equals daily CTS x 365 = annual reduction

The total income, capital, applicable amounts and non-dependant deductions are calculated using the same rules.

There are separate rules where a person can be entitled to alternative maximum council tax reduction, which is also known as second adult rebate. The second adult rebate is based on the income of second adults living in the property.

This was the detailed classification as low income for council tax or just one council. All the other councils function on more or less the same categorisation, with varying amounts that qualify as low income, and different rates of deduction.

Low income households

If your household is on a low income, you could receive support towards some or all of your Council Tax bill through the Council Tax Reduction Scheme.

If you are receiving the benefits below, you can make an application to have your entitlement assessed and applied to your council tax bill:  

  • Job Seekers Allowance
  • Employment Support Allowance
  • Pension Credit
  • Income Support 

If it has not been applied to your bill, you should contact your local authority’s Council Tax department.

Anyone eligible for the benefits above, regardless of whether they are receiving them or not is entitled to receive support towards their Council Tax bill.

You may also claim council tax support even if you are not eligible for the above benefits.

To determine the amount of deduction in this case, approach your local council tax authority, which will look at your weekly income as well as if you have any capital. Capital includes savings and property you own.

Further, how much of a reduction you are entitled to also depends on whether you belong to the working-age class or pensioner. The pension age also varies from council to council.

The fixed rule, however, is that you are not eligible to a reduction if you are:

  • aged under 65 and have capital of £16,000 or more
  • aged over 65 and have capital of £16,000 or more (unless you or your partner gets the Guarantee Credit part of Pension Credit)

Other Councils

There are also certain councils that class low income for council tax based upon different Bands, and age between 18 to 24 and 24 to pension age.

The low income category in the case of Eden district council differs from a single person and a couple. This council also categorises households according to the number of children.

The Band limits for this council are:

  • £18.90 deduction when income is £985.47, and £25.20 weekly deduction when income is £1313.96 – for Band A households, and,
  • £28.35 deduction when income is £1478.21, and £37.80 weekly deduction when income is £1970.95 – for Band B households

This council has separate add-ons for single person, couple and single parent claimant types.

The West Devon Council classifies low income for council tax under 4 Bands having reduction levels between 25% to 85%.

It has categorised people into the following divisions:

  • single 
  • Couple
  • Family with 1 child
  • Family wit more than 1 child

Conclusion

This blog answered the question “What is classed as low income for council tax reduction?” It discussed the details on what is classed as low income for council tax. The values of the actual limit depend upon the individual council, and you can easily determine what category you fall into and what reduction is applicable to you by visiting your local council or its website, and providing, or filling out the required information, and details about your circumstances.

As clarified by the article, the most important parameters are your earning, whether you are single or a couple or have one or more children, and if any state benefits are received by you.

Feel free to contact us if you have any queries or suggestions, or comment your questions in the comment section below.

FAQs

What is classed as low income?

Low income means that a person cannot afford to buy more than basic necessities for them or their family. The government’s work and pension defines department low income as any family which earns less than 60% of the national median pay. 

What is the earning threshold for council tax benefit?

The earning threshold for council tax benefit differs according to every council. It can be found out on your local council’s website.

How do you qualify for council tax reduction?

You are qualified for council tax reduction if you are low on income, and you have savings less than  £16,000, or if you are a pensioner, or when you are suffering from a disability and you need extra living space to help with the disability.

What qualifies as a low income household?

An individual is considered to be in a low income household if their tota; family income is below the low income criterion set by the local council.

What benefits can I claim when on a low income?

You can claim several state benefits if you are on a low income. These include:

  • Universal credit
  • Housing benefit
  • Council tax reduction
  • Loan budgeting
  • Help in payment for funerals
  • Cold weather payment
  • Jobseeker’s allowance
  • NHS low income scheme

Citation

https://www.citizensadvice.org.uk/housing/council-tax/check-if-you-can-pay-less-council-tax/
https://gov.wales/council-tax-discounts-and-reduction/low-income-households
https://www.westminster.gov.uk/council-tax/housing-benefit-and-council-tax-support
https://www.gov.uk/apply-council-tax-reduction
https://www.westminster.gov.uk/media/document/information-on-council-tax-support
https://images.reading.gov.uk/2021/04/Reading-CTR-scheme-2021-22-now-accessible.pdf
https://www.reading.gov.uk/housing/benefits-and-assistance/housing-benefit-and-council-tax-support/counciltaxsupport/
https://www.eden.gov.uk/council-tax-and-housing-benefit/council-tax-reduction/are-you-entitled-to-a-council-tax-reduction/
https://www.sefton.gov.uk/council-tax/discounts-exemptions/council-tax-reduction-scheme-for-people-on-a-low-income/
https://www.ageuk.org.uk/information-advice/money-legal/benefits-entitlements/council-tax-support/
https://www.westdevon.gov.uk/article/6636/Low-Income-Council-Tax-Reduction
https://www.totaljobs.com/advice/council-tax-reduction
https://www.edinburgh.gov.uk/counciltaxreduction
https://www.southhams.gov.uk/article/6643/Low-Income-Council-Tax-Reduction

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.