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Council tax benefit was abolished in April 2013. It has been replaced by council tax reduction. the article below is concerned with the earlier system of council tax benefit not the present council tax support schemes.

Council tax benefits may be available to people on low incomes regardless of whether they are in employment or not.  Council tax benefits may be claimed by people who are in need of financial assistance to pay their bills. People who pay council tax and whose incomes, savings and investments fall under a particular amount may qualify for the benefits.  People may qualify if they are owner occupiers, or if they live in rented accommodation, or if they don’t pay rent.  Second adult rebates may also be available in some cases. Council tax benefits are paid for by the government through the Department for Work and Pensions (DWP) which provides funding to local authorities to pay for the benefits, and to administer the benefit scheme. Applications for council tax benefit are made to local authorities and they operate the system on behalf of the DWP. The amount given can be up to 100% of the total liability. They are not given directly to people but are paid by means of   reductions in   the bills payable.  People receiving benefits and rebates will get new bills showing the reduced amounts of money they will be required to pay.  For the year 2009 - 2010 the amount paid in council tax benefits in England, Scotland and Wales was nearly 4.7 billion pounds. It should be noted that the new Conservative Liberal Democrat government is undertaking a major review of the UK benefits system and information given here could change.

Although council tax benefit can be as much as 100% of the total bill, only people on very low earnings are eligible for the full amount.  It is means tested and there is a low income threshold above which people lose their entitlement. The earnings level at which people cease to be entitled will depend on the particular circumstances – for example it is higher for a couple than for a single person. (Online housing benefit and council tax benefit calculators may be useful for those wanting to find out if they are eligible.) It is also an extremely complicated system and has a low take up rate so that many of those entitled to claim it don’t do so.  Approximately a third of people eligible for the benefit don’t claim it, which equates to about 1.8 billion pounds a year in unclaimed council tax benefit. The take up rate among pensioners is reported to be less than 60% and about 1.7 million pensioner households don’t claim council tax benefit even though they are eligible for it. About three quarters of a billion pounds in council tax benefit that pensioners are entitled to goes unclaimed. (see also Pension Credit and Guarantee Credit.) There are also a great many low income people who do not meet the requirements for council tax benefit. Even though their earnings are below the poverty line, they may be above the threshold of eligibility for council tax benefit and have to pay the full amount. As well as adding to the financial difficulties of low income households, the tax can also act as a disincentive to gaining employment, because what people gain in wages they may lose in benefits. In addition there is a considerable amount of council tax benefit fraud. In England councils could be losing close to £90 million every year due to people falsely claiming the single person’s discount, involving as many as 300,000 households.

Council tax is regressive with people on low incomes paying a higher proportion of their incomes on council tax than people on high incomes. It is based on property and does not take into account how much people earn or their ability to pay. The rich pay a much smaller percentage of their earnings on council tax than the poorest people. Many low-income households pay a greater amount of money in council tax than they pay in income tax. It creates hardship for people on low earnings who do not qualify for the benefit, driving them deeper into poverty. A great many people are given summonses for not paying, often due to a shortage of money. They may have liability orders issued to them, requiring them to pay the full amount owing plus costs.  Money can be deducted from wages or any state benefits and allowances a person may be in receipt of, they may have goods seized by bailiffs to the value of the sum outstanding, they could be made bankrupt, and they may even be sent to prison for non payment.  Local councils try to reach an arrangement for payment with people before going through each of these processes. Councils will only apply to have people imprisoned when all the other steps have failed. The court has to have a means enquiry with the person concerned present before they issue a warrant for commitment to prison, and the court will only issue a warrant if it is satisfied that non payment results from wilful refusal or culpable neglect. Three months is the maximum period of imprisonment that can be imposed. The court can postpone the imprisonment with conditions, usually concerning paying the amount due in a given time period, and the court can also remit some or all of the debt owing.

Council tax is the only form of United Kingdom taxation that requires benefits to enable it to function.  Without the associated benefits, council tax could not work because people with limited financial resources would be unable to pay it.  Some degree of benefit dependency is therefore built into this method of taxation. If local taxation was based on income there would be no need for council tax benefits – the amount payable would be commensurate with earnings and people on very low incomes would not have to pay it. There may be many people who would not have to rely on benefits if it wasn't for council tax. As it is, they  become council tax benefit claimants even though they receive no actual money themselves – what happens is that the funds simply go from central to local government, without the supposed beneficiary being given any  payment at all. Since council tax benefit dependency was created by the last Tory government in 1993, it seems ironic that the present Conservative Liberal Democrat administration should be so critical of what it terms the ‘welfare culture’. Around six and a half million people are eligible for council tax benefits, a far greater number than for any other type of benefit and this means that the tax is the most significant cause of UK benefit dependency. The amount of council tax benefit a person receives can depend on several factors such as their earnings, their savings and capital, and the number of non dependant people there are living in the same dwelling.




Council Tax Benefits Charges Rates Bands Exemptions

Copyright (2007)