COUNCIL TAX
BENEFITS & SAVINGS

 


 
 
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The amount of savings people have can affect their entitlement for council tax benefits. People with savings amounting to more than £16,000 will not usually be entitled to council tax benefit unless they are receiving an income related benefit, e.g. the 'guarantee credit' of Pension Credit,  (However the level of savings and income people have will not affect entitlement to Second Adult Rebate – this depends on the circumstances. of the other person). People are allowed to have up to £6,000 in capital before their eligibility for council tax benefit is affected. For those under 60 a tariff of £1 is applied for every £250 of capital between £6,000 and £16,000. This tariff is assumed to be income - that is each £250 of savings is regarded as providing an income of £1 per week. For people over 60 the lower limit for capital is £10,000. If people have savings or capital up to £10,000 these savings and any income received from these savings is disregarded when working out council tax benefit entitlement. For people over 60 a tariff of £1 for each £500 of capital between £10,000 and £16,000 applies when calculating eligibility for council tax benefit – each £500 of capital is assumed to give an income of £1 per week. Again the upper capital limit is £16,000. If people over 60 have more than this amount they will not be eligible for council tax benefit unless they qualify for the 'guarantee credit' of Pension Credit. When working out income from capital and savings actual rates of interest are ignored. The calculations are based instead on notional tariff income from capital and savings. For the purposes of means testing, capital includes cash, savings held in building society and bank accounts (including non interest bearing accounts), current accounts,  national savings, post office accounts,  stocks and shares, unit trusts, income bonds, premium bonds, ISA's, TESSA's, property and land. Any savings owned jointly with other people are also included. It does not include the property occupied as the main home of claimants. Lump sum payments received after deferring a state pension are also ignored. As are certain compensation payments.

The £16,000 capital cut off applies to couples claiming together and to individual claimants. Almost a third of pensioner households have more the £16,000 in savings but less than 15% of households which include a working adult have this amount of savings. The average working age household only has about £300 saved up. Under present plans, the £16,000 capital rule will also apply to the government’s proposed Universal Credit. The government argues that people with a substantial amount of savings or other forms of capital have enough resources  to meet their requirements and that they should use these funds before getting financial support from other taxpayers, especially as many other people are paying tax and have savings under these amounts. Less than twenty percent of families have savings greater than £16,000. It is argued by the government that a £16,000 limit together with the assumed tariff income achieves the correct balance between protecting those with modest amounts of savings and requiring those with substantial savings to assume more responsibility for their own support. The idea is to focus universal credit on those with whose resources are not sufficient to meet their needs.

 

 

 


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