What is classed as low income for council tax reduction?

Are you eligible for a council tax reduction due to being on a low income? Find out if you could lower your bills.

If you pay council tax, there are several reasons why you could be eligible for a council tax reduction. Being on low income is one of them.

You may be able to get a discount of up to 100% on your council tax bill if you have a low income. Which is good news as council tax becomes increasingly expensive.

This is known as the council tax reduction, though it’s sometimes called council tax support. It replaced council tax benefit in 2013.

How much your bill is reduced will depend on your circumstances, such as your income, savings and who you live with. Here’s what you need to know.

You might also be paying too much council tax if you’re on the wrong band. Check which council tax band you fall under.

If you’re on a low income and looking for more support, you could see if you’re eligible for a social broadband tariff, Warm Home Discount or cost of living payment. You might also qualify for a grant for help with your energy bills, including E.on Next’s 50% off the energy price cap.

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Council tax reduction: what is classed as low income?

It’s up to each local council to decide how it pays council tax reduction, and each has its own set of rules. It will decide the level it considers to be a low income, and will look at your council tax band – as well as how many adults and children live in your home – when calculating the reduction.

You’ll need to contact your own council to establish exactly what it deems as a low income. As far as the council is concerned, your income is made up of more than just your wages – things like tax credits, state benefits or pensions are also included.

Most councils use two calculations when working out how much a council tax bill can be reduced by. These are:

  • Working age rules: based on a person’s age
  • Pension age rules: based on whether or not they’re receiving the state pension

However, as a rough guide, most set a weekly limit. If someone earns more than this amount, they can’t apply.

Let’s take the example of Eden District Council. The maximum weekly earnings for a single adult household without children, in council tax band D, and with residents aged 18-24 is £205.65, which works out at around £10,693.80 per year.

If you earn above this level, you won’t be able to get help. This income limit increases to £313.90 for couples within this age bracket.

The size of the potential council tax reduction then increases as you get older. If you are single and aged between 25 and state pension age, living in a band D property, then the maximum weekly income increases to £221.60 (increasing £313.90 for couples), while if you reached state pension age after 1 April 2023 then it moves to £327.20 (increasing to £471.55 for couples).

Remember that these levels are set by individual councils, so the thresholds may be different in your area.

Find out more about how council tax is calculated, and discounts in single-adult households.

Council tax reduction: can you benefit if you have savings or money in stocks and shares?

If you have savings or investments, these will be taken into consideration when a council assesses your eligibility for a council tax reduction.

If you ‒ or you and your partner ‒ have more than £16,000 in savings and/or investments, you won’t be able to apply for a council tax reduction.

If you have less than this, most councils use a tariff system to work out how much of a reduction you could get. While this varies depending on the council, many use the following system.

If you (or your partner) have £6,000 or less and are working age, this does not impact your claim.

Anything between £6,000 and £16,000 will be looked at and will affect the amount you could get.

For every £250 you have over £6,000, £1 per week is added to the amount the council considers as your income when working out your entitlement to a council tax reduction.

Importantly, it does not count any actual interest you get from the savings or investments.

Pension age

If you (or your partner) have £10,000 or less, and are the qualifying age to claim the state pension, this won’t impact your claim.

If you have between £10,000 and £16,000, for every £500 you have over £10,000, £1 per week is added to the amount the council will consider as your income when working out your entitlement to a reduction.

Anything you have in assets won’t usually be included if you already get one of the following benefits:

  • Universal Credit
  • The ‘guarantee’ part of Pension Credit
  • Income Support
  • Income-based Jobseekers’ Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)

It’s not just money in a bank account either. The following may also be looked at:

  • Money held in banks, building societies or the Post Office
  • Income Bonds
  • National Savings Certificates
  • Stocks and shares
  • Individual Savings Accounts (ISA)
  • Tax-exempt Special Savings Accounts (TESSA)
  • Cash at home
  • Property (not the one you live in) or land you own

Council tax reduction: if I live with someone, does their income count too?

If you’re in a couple, their income and assets are included, as shown in the example above.

If you live with other adults (but not a partner), the amount your bill is reduced by can be affected by their income. These people need to be aged 18 or over, and are classed as ‘non dependents’ by councils.

Anything they pay to you for staying in your home, such as rent, doesn’t count as income when calculating a council tax reduction.

They also won’t be counted if the following apply:

  • Someone on a youth training scheme or apprenticeship
  • Full-time students
  • Someone at school and eligible for child benefit
  • If they normally live elsewhere

The exact amount your discount is reduced by will be set by your local council, and some don’t include non-dependents at all. It’ll depend on the person’s age, the number of hours they work, and any benefits they’re already receiving.

How can I apply for a council tax reduction?

You’ll need to apply directly to your local council for a reduction, and you can find out their contact details on GOV.UK. Councils will often set out the rules and requirements for eligibility on their website. 

When applying, you will need to provide evidence of certain elements, such as your income and any assets you own.

Find out everything you need to know about getting a council tax reduction.

Is council tax reduction included in Universal Credit?

Unfortunately there is no uniform approach here. Since council tax reductions are set by individual councils, they also take their own approach to whether to include council tax reductions in their universal credit calculations.

As a result, you will need to check with your local council how they handle this situation.