Proposals for redesigning Council Tax Reduction in the city

We’re consulting on proposals to change the way the financial support works to help low income households in the city with Council Tax.

Council Tax Reduction (CTR) helps low income households with their Council Tax. Residents who pay Council Tax are eligible for support if their income and savings are below a certain level.  

We are required to review our CTR scheme every year and are now consulting on the proposed changes to the scheme for 2022/23.

Any changes made to the scheme will only affect working age people. People of pensionable age are assessed under national rules and the way their Council Tax Reduction will be worked out will remain as it is now.  

There are currently around 12,300 working age households in the city claiming CTR.

Proposals for a new scheme based on earnings brackets

The key proposed change for next year is to switch to a scheme based on earnings brackets for people claiming Universal Credit.

At the moment, when we calculate CTR, we look at who is living in your household, along with your income and savings. The more income you have, the lower your CTR is likely to be. 

In the new scheme for Universal Credit claimants, we will just be looking at net earnings, and seeing what bracket they fall into. 

This means the amount of reduction claimants get will depend on how much they earn from working. Their other income will be ignored, such as Universal Credit, other benefits or pensions. 

People who are not working, or on the lowest earnings, will continue to have an 82% reduction to their Council Tax, while people in higher earnings brackets will pay more, depending on their weekly earnings.

The aim of this is to make the scheme easier to understand and fit better alongside Universal Credit claims.

Universal Credit works in a different way to previous benefits and can change monthly.

As more and more people move on to Universal Credit, it can mean that a claimant’s CTR and Council Tax bill needs recalculating monthly – leading to confusion about how much to pay and a lot of extra administration.

This new scheme will allow people to have a more stable Council Tax Reduction, with fewer changes, making it clearer how much Council Tax people claiming CTR will have to pay. 

It should also mean far fewer changes to people’s bills during the year.

The new scheme will allow us to help more people than we currently can as people with earnings up to £250 per week can receive some CTR, while keeping the maximum discount for the lowest earners.

For people not currently claiming Universal Credit, the proposal is to keep to the existing CTR scheme. 

The consultation is open until 18 October.

A clearer and more supportive scheme

Councillor David Gibson, Joint Deputy Chair of the Policy & Resources Committee (Finance & Resources), said: “One of our key priorities is to address inequality, poverty and financial inclusion in the city. 

“We’re keen to do as much as we can to increase the financial support available to residents through the Council Tax Reduction scheme. 

“Last year we made the scheme more generous for those on the lowest incomes. This improvement will be sustained this year. 

“We are consulting about additional changes to spend less money on administration by making the scheme simpler and clearer, as well as expanding its scope to include people earning up to £250 a week.

“As more people move on to Universal Credit, the current scheme is proving burdensome to manage and confusing for people to know how much they need to pay.

“We’re keen to cut down the unnecessary administration and make sure we can use the ever-reducing funding we receive to financially support those who need it most.

“Since the government scrapped Council Tax Benefit in 2013 and placed the cost of supporting people with Council Tax bills on to councils, we have to strike a balance between the cost of the scheme with the council’s ever increasing budget pressures.

“It is really important we get the scheme right, so please do have a look at the detail of the proposed options and send us your feedback.”

Next stages

Feedback from the consultation will be used to draw up the final proposals for a report to the Full Council in December 2021. 

If agreed, the new scheme for people claiming Universal Credit would be introduced from 1 April 2022.