Council Tax Reduction Scheme 2025 to 2026

7. Where a pensioner is receiving the guarantee part of State Pension Credit,[footnote 4] their income and capital are ignored for the purposes of council tax reduction, so the pensioner receives a 100% reduction on their council tax bill. Where a pensioner is receiving only the savings credit part of State Pension Credit, the amount of income and capital used in the Department for Work and Pensions assessment is used for the calculation of council tax reduction.[footnote 5]

Working-age applicants

8. The Council has devised its own scheme for working-age applicants.

9. Subject to some overall conditions (see paragraph 10 below), there are two groups of working-age applicants in financial need who the scheme is designed to help:

• those who do not receive Universal Credit and whose income[footnote 6] (if any, and after appropriate disregards) for the relevant week is within any income band prescribed by the Council as set out in the table below. Income is calculated in accordance with paragraphs 14-27 of this scheme.

• those who do receive Universal Credit and whose income[footnote 7] (if any, and after appropriate disregards) for the relevant week is within any income band prescribed by the Council (as above) and who satisfy the conditions set out in Appendix 3.

10. The overall conditions for applicants to receive financial assistance from the scheme are that they:

• live in the property as their main home; and
• are liable to pay council tax; and
• meet the residence rules; and
• have capital not exceeding £16,000; and
• have made an application for assistance from the scheme. 

Living Allowances (pensioners only)

11. In the calculation of council tax reduction for pensioners, the amount allowed for living expenses is made up of the following components:

• an amount for the applicant or, if they are a member of a couple, an amount for both of them;
• if appropriate, an amount for children or young persons who are members of the applicant’s family, together with an additional amount – the family premium;[footnote8]
• if appropriate, additional amounts, or premiums, as set out in Appendix 1, for example to cover expenses associated with disability.

12. An applicant is treated as responsible for a child or young person who is normally living with them. Where a child or young person spends broadly equal amounts of time in two separate households, or if there is a question as to which household a child or young person lives in, the person who receives Child Benefit (or who has applied for Child Benefit) in respect of that child or young person is treated as responsible. In the absence of a Child Benefit claim, the person who has primary responsibility is treated as responsible. For the purposes of this scheme, only one person can be responsible for a child or young person in any one council tax reduction week.

13. There are special arrangements for polygamous marriages (see Annex 2). 

Treatment of income

(Paragraphs 14-27, and Annexes 5 and 6, apply to pensioners, and working-age applicants who do not receive Universal Credit.)

14. In the calculation of council tax reduction, most income is taken into account, although some types of income are ignored in whole or in part. The definition of income includes earnings, benefits and pensions[footnote9] and the following paragraphs explain how various types of income are treated in the calculation. The income of an applicant’s partner is treated as belonging to the applicant.

15. Income is calculated on a weekly basis. In order to arrive at the weekly amount of earnings and other income to be taken into account, a monthly payment is multiplied by 12 and divided by 52; a three-monthly payment is multiplied by 4 and divided by 52; where the payment is for a year, the amount is divided by 52; in other cases, the amount is converted to a daily amount and multiplied by 7. Where applicable, an assumed income from capital is added (see paragraphs 35 and 36) and, where relevant and subject to certain conditions, childcare charges are deducted. The weekly maximum amounts to be deducted are £175 for one child and £300 for two or more children.

16. Where incurred, childcare charges can be deducted from income where the applicant is:

• A lone parent who is in remunerative work;
• A member of a couple both of whom are in remunerative work;
• A member of a couple one of whom is working and the other is incapacitated, in hospital or in prison.

17. Annex 3 explains these childcare provisions in more detail and contains a definition of the childcare charges which can be deducted.

Earnings from employment

18. In the calculation of council tax reduction, an applicant’s net earnings are taken into account, after deductions have been made from their gross earnings for: income tax, class 1 National Insurance contributions, and 50% of contributions to occupational or personal pension schemes.

19. Where an applicant has earnings from employment, the weekly amount of earnings is averaged over 5 weeks prior to the first week in which support is payable if the applicant is paid weekly, and 2 months if the applicant is paid monthly. However, where an applicant’s earnings fluctuate, earnings can be averaged over any reasonable period. If an applicant has been working for less than 5 weeks or 2 months, the average weekly earnings are estimated based on either any earnings received, if representative of future earnings, or an estimate provided by their employer. If earnings change during the period of an applicant receiving council tax reduction, average earnings are estimated over any reasonable period but not more than 52 weeks.

20. Earnings are taken into account from the date of application even if they were not received during the week of application. Where an applicant starts work after an application for council tax reduction has been made, earnings are taken into account from the first reduction week after they began work, even if they were not actually received in that week. Similar arrangements are made when earnings change.
 
21. See Annex 4 for the definition of earnings as an employed earner.

22. An applicant for council tax reduction is treated as self-employed if they are gainfully employed but not as an employed earner.

23. Where an applicant is self-employed, weekly earnings are estimated over a reasonable period but no more than over 52 weeks. For pensioners the period is 52 weeks in most circumstances. See Annex 5 for a description of how self-employed earnings are calculated.

Other income

24. Income other than earnings is fully taken into account unless specified in Appendix 5 which lists income that is ignored. Weekly income other than earnings is also estimated over a reasonable period but no more than over 52 weeks. Any tax payable on gross income is ignored. See Annex 6 for a description of how income other than earnings is calculated.

25. Benefit income is taken into account over the period in which it is paid. The period over which a tax credit payment is taken into account varies depending on whether the payment is a daily, weekly, two-weekly or four-weekly instalment. Benefit income taken into account is normally the gross amount before any deductions are made from it. If Working Tax Credit is subject to overpayment recovery, the amount of Working Tax Credit taken into account is the net amount, i.e. after the deduction for the overpayment has been made. Capital paid by instalments in some circumstances, and annuity payments, are treated as income.

26. In most cases, income that the applicant has not obtained (for example, a deferred pension) but is available on application is treated as possessed by them, but only from the date on which it could be obtained.[footnote10] This includes applicants who are eligible to claim Universal Credit but who have not done so. The Council will calculate the potential Universal Credit available. With some exceptions[footnote11], payments made to third parties on behalf of the applicant are treated as possessed by the applicant.

27. If it appears to the Council that a pensioner applicant has come to an arrangement with a non-dependant member of the household specifically to take advantage of the council tax reduction scheme, where the income and capital of the non- dependant exceeds that of the applicant, the income and capital of the non-dependant is treated as if it were the applicant’s, and the applicant’s income is ignored. This rule does not apply in the case of an applicant in receipt of the guarantee part of State Pension Credit.

Treatment of capital

28. Subject to paragraph 7, if an applicant has more than £16,000 in capital, no council tax reduction is payable under this scheme.

29. All capital is taken into account in the calculation of the award, including income treated as capital, unless it is listed in Appendix 6 in which case it is ignored. The capital of a child or young person who is a member of the applicant’s family is also ignored. The capital of an applicant’s partner is treated as if it belonged to the applicant.

30. Certain types of income are treated as capital (and vice versa). See Annex 7 for a full list.

Notional capital

31. If an applicant deliberately disposes of capital in order to obtain council tax reduction, it is assumed that the applicant still possesses that capital and it is therefore taken into account. This notional capital is reduced over time[footnote12] by the amount that the applicant would have received in council tax reduction if they had not been treated as having that capital. With certain exceptions, where an applicant fails to realise capital which they own, that capital is also taken into account. Most payments of capital made to a third party on behalf of the applicant are taken into account.[footnote13]

Calculation of capital

32. Capital which an applicant possesses in the United Kingdom is calculated at its current market or surrender value less:

• 10% if there are expenses attributable to its sale, and
• the amount of any monetary claim secured against it.

33. Capital which an applicant possesses outside the United Kingdom is treated in the same way except that it is calculated:

• at its current market or surrender value in that country if it can be transferred to the United Kingdom; or
• if it cannot be transferred to the United Kingdom, at a price which it would realise if it were sold in the United Kingdom to a willing buyer, less:
  • 10% for sales costs, if appropriate, and
  • the amount any monetary claim secured against it.

34. Where an applicant owns capital jointly with one or more persons, each share is treated as equal unless there is evidence to the contrary.

35. Where a pensioner applicant has capital exceeding £10,000, income of £1 is assumed for every complete £500 up to a maximum of £16,000. In making this calculation, if the final part of the excess is not a complete £500, an income of £1 is nevertheless taken into account.

36. Where a working-age applicant has capital exceeding £6,000, income of £1 is assumed for every complete £250 up to a maximum of £16,000. In making this calculation, if the final part of the excess is not a complete £250, an income of £1 is nevertheless taken into account.

Calculation of council tax reduction

Maximum council tax reduction

37. Council tax is calculated on a daily basis. For any day for which an applicant is liable to pay council tax, the maximum amount of council tax reduction is 100% of the amount of council tax set by the council for the applicant’s dwelling, less any appropriate discount, divided by the number of days in that financial year.[footnote14]

Where income is more than the amount for living expenses (pensioners only)

38. Where an applicant’s income is greater than the amount allowed for living expenses in their case, council tax reduction is withdrawn gradually (sometimes known as the taper) as income increases, until entitlement is extinguished altogether.[footnote15] This avoids a cliff-edge effect of suddenly ending all support as soon as income becomes greater than the amount for living expenses.

39. For example, if an applicant’s weekly maximum council tax reduction is £15, and the amount for living expenses in their case is £100 a week, they are entitled to maximum support of £15 providing their income is not greater than £100. If their income increases to £120, a sum equal to 20% of the difference between their income (£120) and the amount for living expenses (£100) is deducted (20% of £20 = £4) from their maximum council tax reduction, so they receive £15 less £4 = £11 a week. If their income increases further to £180, the amount deducted from their maximum council tax reduction is £16 (20% of £80 is £16) and there is, therefore, no entitlement to council tax reduction because £16 is greater than the maximum of £15.

40. In calculating the amount of council tax reduction, fractions of less than half a penny are rounded down and fractions of half a penny or more are rounded up.

41. Where an applicant is jointly liable for council tax with other residents at the same dwelling, the council tax set by the authority (less any discount) is divided by the number of people jointly liable and the applicant’s council tax reduction is based on their share. This does not apply in the case of a student where they are excluded from entitlement to council tax reduction, or a partner of the applicant.

Non-dependant deductions

42. A non-dependant is a person living as a member of the applicant’s household who is not their partner or a child/young person for whom they are responsible. There are certain exceptions such as joint-occupiers, boarders and paid carers, who are not treated as non-dependants. Non-dependants aged 18 or over are usually expected to contribute to household expenses such as council tax.

43. The weekly deductions for a non-dependant aged 18 or over are shown in the table below:

44. In the case of non-dependant couples only one deduction is made, but all their gross income is taken into account.

45. Where there is joint liability for council tax in a household, other than joint liability between an applicant and their spouse or civil partner, and there is a non-dependant who is a non-dependant of two or more of the liable persons, the deduction is divided equally between the liable persons. If the non-dependant is a non- dependant of one liable person, the full rate of the deduction is applied solely to that liable person.

46. No non-dependant deductions are applied if the applicant or their partner:

• is registered as severely sight-impaired or blind;
• is receiving Attendance Allowance, the care component of Disability Living Allowance, the daily living component of Personal Independence Payment, a Pension Age Disability Payment, or an Armed Forces Independence Payment, or the daily living component of Adult Disability Payment, including where these benefits and payments are temporarily suspended, for example through hospitalisation.

47. No non-dependant deductions are applied where the non-dependant:

• normally lives elsewhere;
• is receiving a training allowance paid as part of a youth training scheme;
• is a full-time student;
• has been a hospital in-patient for more than 52 weeks;[footnote16]
• is not living with the applicant because they are a member of the armed forces away on operations;
• is receiving a payment for a disability caused by the Thalidomide drug;
• is receiving Income Support, State Pension Credit, income-based Jobseeker’s Allowance or income-related Employment and Support Allowance (pensioner applicants only)[footnote17];
• is receiving Universal Credit on the basis that they do not have any earnings (pensioner applicants only);
• is a person disregarded for the purposes of council tax discount.

48. In calculating a non-dependant’s income, the following are ignored:

• Attendance Allowance, Disability Living Allowance, Child Disability Payment, Personal Independence Payment, Adult Disability Payment, a Pension Age Disability Payment, or Armed Forces Independence Payment;
•  payments made under certain specified trust funds and compensation schemes[footnote18] including analogous payments.

Temporary Absences

49. An applicant can be regarded as living in their home and therefore eligible for council tax reduction even if they are temporarily absent for certain periods. Council tax reduction is payable during periods of temporary absence if the applicant:

• is liable for council tax and the address they are temporarily absent from is their sole or main residence;
• intends to return to live in their home;[footnote19]
• is not letting or sub-letting that part of the home that they normally occupy;
• is unlikely to be away for more than the time allowed (see below).

50. In calculating the period of absence, the first day of absence is included and the day of return is excluded.

51. With one exception (see paragraph 52), a period of absence from home must not be (or must not be expected to be) more than 13 weeks. However, this is extended to 52 weeks where the applicant is:

• a remand prisoner awaiting trial or sentence;
• living in a bail or probation hostel, or bailed to live away from home;
• a hospital patient (or similar medical institution);
• receiving (or whose partner or child is receiving) medically approved treatment or care, in accommodation other than residential accommodation;
• providing medically approved care to someone else, or caring for a child under 16 whose parent or guardian is away from home because they are receiving medically approved care;
• absent because of fear of violence in the home or domestic abuse;
• on an approved training course;
• a student who is eligible for council tax reduction and they have to study abroad as part of their course;
• in a residential care home, other than on a trial basis.

52. A period of absence from home outside Great Britain must not be (or must not be expected to be) more than 4 weeks.[footnote20] However, if the applicant is absent from Great Britain because of the death of a close relative (or a close relative of their partner, or a child and young person for whom either of them are responsible) and it is unreasonable for them to return within the first 4 weeks, the Council may decide that council tax reduction can be paid for up to 8 weeks.

53. The 4-week period can also be extended to 26 weeks where the applicant is:

• a member of the armed forces on operations overseas;
• receiving medical treatment in hospital (or similar institution);
• absent because of fear of violence in the home or domestic abuse;
• undergoing (or their partner or dependent child is undergoing) medical treatment or medically approved convalescent care in accommodation other than residential accommodation;
• a mariner or continental-shelf worker.

Extended support - the run-on

54. Extended council tax reduction (sometimes known as the run-on) can be awarded to working-age people who have been (or their partners have been) receiving Income Support, income-based Jobseeker’s Allowance or income-related Employment Support Allowance for at least 26 weeks, and who come off that benefit because they or their partners start employment as an employed or self-employed earner, or increase their hours or earnings, where that employment is expected to last 5 weeks or more. This also applies to those, including pensioners, who were receiving certain contributory benefits which end for the same reason. The qualifying contributory benefits are Incapacity Benefit, contributory or new-style Employment and Support Allowance, and Severe Disability Allowance. The qualifying rules are broadly the same as for those coming off income-related benefits.

55. Extended support can be made for up to 4 weeks starting from the beginning of the week after entitlement to a qualifying benefit ends. Support lasts for 4 weeks unless the applicant’s liability for council tax ends first.

56. The amount of the extended payment is usually the amount that the applicant was entitled to during the last week that they were receiving a qualifying benefit. However, if for any reason entitlement to council tax reduction after the change of circumstances is higher, the higher amount is paid.

57. Where an applicant who is entitled to extended support moves from one local authority to another, extended support may take the form of a payment from one local authority to the other, or directly to the applicant. The amount of extended payment remains the same, that is, the amount payable in respect of the last week before entitlement to a qualifying benefit ceased. Where an applicant continues to be liable for council tax, the second authority must reduce the new amount of council tax reduction by the amount of the extended support already awarded.

58. Entitlement to council tax reduction does not end until the end of the extended support period, even if entitlement would otherwise have ended based on the applicant’s new circumstances. The general rules for calculating changes of circumstances do not apply.

59. In order to ease the transition to retirement, an applicant will continue to receive a council tax reduction for a period of 4 weeks from the day after a claim for a working-age income-related benefit has ceased because they have reached the qualifying age for State Pension Credit, or for four weeks after their partner has claimed State Pension Credit.