Council Tax Reduction schemes: what you need to know

Updated on 08 March 2013 | 15 Comments

As part of the Council Tax changes from April Council Tax Reduction schemes will replace Council Tax Benefit. More people will have to pay Council Tax, but with many unable to, councils have admitted they have no idea how to claim the unpaid tax!

Your local council will take over responsibility for the collection of Council Tax in April this year. But they already anticipate problems with non-payment, and alarmingly, don’t appear to have much of a plan of action to deal with the issue!

What are the changes?

From 1st April various changes to the benefits system are being bought in by the Government in the name of Welfare Reform. One of these is a change to the way Council Tax is charged and collected, while new Council Tax Reduction schemes are being introduced that will be run by your local authority.

Council Tax Reduction schemes are essentially replacements for Council Tax Benefit, which is being abolished. The details of each scheme varies from council to council, but they are all supposed to help those residents considered to be in financial need.

However, the fact is that many lower income families who previously received full Council Tax Benefit (meaning that they didn’t have to pay anything at all) will no longer be exempt. On average these families will now be expected to find £247 a year.

What else changes in April 2013?

It’s not just Council Tax that will change. The following benefits will also be affected come April.

  • Housing Benefit: there will be a cap on the amount of benefit that working age people can receive and the controversial ‘bedroom tax’ (whereby if your property has more bedrooms than required you will have your housing benefit reduced) will come into effect. Read Bedroom tax: why social tenants will soon be taxed on their spare bedrooms for more.

  • Pilot schemes are being introduced from April to test run the new Universal Credit. Check out Benefit Reform: all you need to know about the Universal Credit for more information.

  • Disability Living Allowance will begin to be gradually replaced by a new benefit called Personal Independence Payment (PIP).

Penalties for non-payment of Council Tax

The nation's councils have realised that a large proportion of low income families will baulk at such an increase in their Council Tax. To go from paying very little, or in some cases nothing at all, to paying over £200 a year will hit some families hard, and many will be unwilling – or just plain unable – to pay.

Under normal circumstances, when people ‘neglect’ to pay their Council Tax the council will vigorously pursue the debt. They start by making written demands for the money, but if these go unanswered then they will apply to the magistrates’ court for a Liability Order.

This Order allows the local authority to make arrangements for the arrears to be paid by deductions from any other benefits that person receives (such as income support or Jobseeker's Allowance). They can also apply to take deductions directly from wages if the person is working.

The next stage would be to employ bailiffs to visit you and take goods. Read Your rights with bailiffs.

Ultimately, you can be sent to prison if you don’t pay up!

As an adviser for the Citizens Advice Bureau, I deal with lots of debt clients. When they come in with mountains of debt, any Council Tax debts are moved to the top of the list and dealt with as a priority debt, mainly because of the possibility of imprisonment.

The problem

If a very large number of families on low incomes refuse to pay the tax – as is expected by councils across the UK – how do councils plan to recover the money? While the charges represent a big expense to low income families, the actual increase per household is only a few pounds a week. The costs of recovering this money (bailiffs don’t work for free you know!) will outweigh the amounts being collected.

Councils admit that in many cases it won’t be worth the time and money to start proceedings. In fact, Freedom of Information Act requests made by campaign group False Economy reveal that a large number of councils have actually budgeted to write off this anticipated shortfall!


Deducting the Council Tax owed from other benefits these families receive, via a Liability Order, is seen by some to be harsh. It's also ultimately counterproductive as it will plunge thousands of people further into debt. Because of this, it is not an option that most local authorities will wish to take (although North Tynside Council has admitted that it intends to do just this).

So your council is left with some stark choices: 

  • relentlessly (and expensively) pursuing the poorest people in their borough for a few pounds a week;
  • write off the debts completely (further increasing the massive deficit that most local authorities face and causing cuts in essential services); or
  • revive memories of the phenomenally unpopular Poll Tax and simply sling everyone who can’t pay into jail! The number of people expected to default is just so high that the ultimate penalty of imprisonment might be impractical. You can’t put everyone in prison. Can you?

What do you think the solution is?

More on tax:

Your rights with bailiffs

How to slash your Council Tax bill

Millions face Council Tax rises of up to £600

HMRC names and shames tax cheats

HMRC targets second home sellers


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