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How a council tax reduction is calculated

How is it calculated?

If you get:

  • Income Support
  • Job Seeker's Allowance (Income Based);
  • Employment and Support Allowance (Income Related); or
  • Pension Guarantee Credit

you will get the full amount of your Council Tax. This is after any non-dependant deductions have been applied to the calculation.

If you do not get:

  • Income Support;
  • Job Seeker's Allowance (Income Based);
  • Employment and Support Allowance (Income Related); or
  • Pension Guarantee Credit

we work out your reduction. We do this by comparing the money you get each week with your 'Applicable Amount'. Your Applicable Amount is what the Government says you and your family need to live on each week. The Applicable Amount will be higher for some people. This may be if you are a pensioner, disabled, or you are a one-parent family.

If your weekly income is less than, or the same as your Applicable Amount, you will get the full amount of your Council Tax. This is after any non-dependant deductions have been applied to the calculation. If this happens, you should claim Income Support. If your weekly income is more than your Applicable Amount, the amount of Council Tax Reduction you are entitled to receive will be equal to the weekly Council Tax. This income over your Applicable Amount is called 'Excess Income’. This will be less 20% of the weekly Excess Income figure, and less any non-dependant deductions. Support. You may get more help.

How is my weekly income calculated?

We count the money that you and your partner earn from work after money has been taken out. This is for Tax, National Insurance and half of any money paid into a pension fund. To this figure we add any other income that you might have. For example:

  • a state retirement pension;
  • a pension from a former employer;
  • tax credits; or
  • other state benefits.

Some types of income are disregarded and are not taken into account. Here is an example:

  • Disability Living Allowance;
  • Personal Independence Payments;
  • Attendance Allowance;
  • Child Benefit.

Even though they are not taken into account, it is still important that you tell us about them.

A Tariff Income may also be calculated from any capital/savings that you or your partner have. This is added to the above figures. Please see the 'What counts as capital and how does it affect my entitlement?' section below. For the purposes of working out your entitlement, your weekly income is:

  • the total of any earned income;
  • unearned income;
  • and Tariff Income.

as detailed above.

What counts as capital and how does it affect my entitlement?

For Council Tax Reduction Scheme purposes, most savings, investments and assets owned by you and your partner are treated as 'capital'. Examples of the most likely sources are:

  • cash savings;
  • current accounts. Even if you only use it to get things paid into it, like wages, or a pension, or you just use it to pay bills;
  • money in a bank, post office, or building society account;
  • money in savings schemes;
  • National Savings Certificates;
  • Premium Bonds;
  • stocks and shares, bonds and other investments;
  • property or land.

The following do not count as capital:

  • personal possessions;
  • certain business assets, if you are still working in the business;
  • surrender values of Life Policies;
  • sale proceeds of your home. This can be for up to six months if you intend to purchase another home;
  • money from insurance claims in respect of loss or damage to home or personal possessions. This can be for up to six months if used to replace or repair;
  • any Social Fund payment.

The above lists are not exhaustive and enquiries should be made to clarify the situation if you are doubtful about any asset or interest you have.

How your Capital Tariff is calculated

Once we have worked out what your capital amounts to, the rules say that:

  • if you and your partner have savings or capital of more than £16,000, you cannot get a Council Tax Reduction;
  • if you and your partner have £6,000 or less, it will not affect your claim. If you are the qualifying age to claim State Pension Credit, this figure is £10,000;
  • if you or your partner have
    • reached the qualifying age to claim State Pension Credit
    • have between £10,000 and £16,000, it affects the amount you will be entitled to.
  • For every £500 (or part of £500) you have over £10,000, we add £1.00 to the money we count each week. We do this when working out your entitlement;
  • if you and your partner have not reached the qualifying age to claim Pension Credit and have
    • between £6,000 and £16,000, it affects your entitlement to a Council Tax Reduction.
    • For every £250 (or part of £250) you have over £6,000, we add £1.00 to the money we count each week. We do this when working out your entitlement. This money, counted from your capital is called Tariff Income. We do not count any actual interest you get from savings and capital.

For Second Adult Rebate (Alternative Council Tax Reduction Scheme) the Capital Tariff does not apply. The actual interest received by the second adult is counted instead.

What is an applicable amount?

This is a weekly figure set usually, annually, by the Government. It represents the basic living needs of the claimant and family. An applicable amount is made up of:

  • a claimant's personal allowance;
  • personal allowances for a partner and/or dependant children;
  • premiums - for example, a family premium or disability premium.

If your weekly income is less than, or the same as your Applicable Amount, you will get a reduction. This is equivalent to your Council Tax liability. If this happens you should claim Income Support. You may get more help. If your weekly income is more than your Applicable Amount you are entitled to a reduction. This is equal to the weekly Council Tax. Any income over your Applicable Amount is called 'Excess Income'. This is less 20% of the weekly Excess Income figure, and less any non-dependant deductions.

What if I still have some Council Tax to pay?

You should contact our Council Tax Team if you cannot afford to pay. They will discuss with you options to make the payments more manageable.

How does the reduction work?

The amount of reduction you are entitled to is applied directly to your Council Tax Account. This reduces the amount of Council Tax you have to pay. You will receive a new bill showing the amounts you need to pay.