More council tax information

Part 2: Discounts and reductions

Part 3: Weekly income and capital

Part 4: Crucial calculations

Part 5: Special benefits

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Discounts on council tax - part three

Working out your income is a bit tricky. And you have to do it in two parts.

Part 1 – weekly income
Your weekly income is counted after any tax or national insurance has been deducted. If you are married or in a civil partnership, or live with someone as if you are, add your incomes together. Add up all your income, including of course any pension, state pension, or the savings credit part of pension credit. If some income is paid monthly multiply it by 12 and divide by 52 to get your weekly income. If you have an equity release scheme which pays you a regular income that is counted. But if the plan gave you a capital sum rather than an income, that counts as part of your capital. How capital is dealt with is described a bit later.

Do NOT count as part of your income:
· Attendance Allowance, Disability Living Allowance, War Pensioner’s Mobility Supplement, Constant Attendance Allowance, Exceptionally Severe Disablement Allowance and Severe Disablement Occupational Allowance
· Housing Benefit or Social Fund payments
· Christmas Bonus or Winter Fuel Payment
· Child Benefit or Child Tax Credit
· War Widow’s Supplementary Pension (£68.42 this year).
· Almost all councils let you ignore all of a war disablement pension or war widow’s pension. But a few mean ones may not. You’ll have to ask.

If you have earnings from paid work, take off £5 if you are single, £10 between you if you are part of a couple, £20 if you are disabled and your disability began before the age of 60, or £20 if you get Carer’s Allowance.

The interest you receive from any savings isn’t counted as income so do not add that on. But if you have savings above £6,000 you will have to add on an amount to your income. How that is dealt with is explained next.

Part 2 – capital
If you have any capital worth £6000 or less you need not worry – you can ignore the capital and any income it might earn. If your capital is worth more than £6000 you have to add on an amount to your weekly income.

Your ‘capital’ includes any cash you have in a bank or building society – or under the mattress – savings, investments such as shares, which will be counted at roughly the market price on the day you claim, and National Savings products which are counted at their current cash-in value. Although the interest is not counted as income, when it is credited to your savings it then becomes part of your capital.

Some things do not normally count as capital. You can ignore personal possessions, even valuable ones such as jewellery. You can also ignore the value of your home (but only one!), the capital value of your pension fund or annuity, and the value of any funeral plan. If you have sold your home and are about to buy another, you can ignore the money from the sale.

If you are married or in a civil partnership, or live with someone as if you are, add your savings together.

When you have worked out how much capital you have, you have to do some arithmetic to work out how much you add to your weekly income. The rule is that you need to add an extra £1 to your income for every £500 (or part of £500) that you have over £6,000. There is an easy way to work this out below. If your capital comes to £6,000 or less you don’t need to add any extra amount on to your weekly income. If it totals more than £16,000 then you will not get council tax benefit.

If your capital is between £6001 and £16,000:
1. If it is an exact number of thousands, leave it as it is and go to step 2. If it is not an exact number of thousands, round it up to the next £500. So £8,000 stays at £8,000 but £8,001 becomes £8,500 and £8,764 becomes £9,000. Go to step 2.
2. Subtract £6,000, then
3. Divide by 100 – do that by knocking off the last two zeroes, then
4. Divide by 5.

The answer you get is the extra amount you have to add on to your weekly income.

For example, Pam and Eric have a total of £12,821 in bank and building society accounts. It is not an exact number of thousand pounds so Pam (who looks after the family finances) rounds it up to the next £500 making £13,000. She subtracts £6,000 which leaves £7,000. She knocks off the last two zeroes to give £70 and divides that by five to give £14. Pam and Eric add £14 to their actual weekly income.

Of course, this is a more than the actual income £12,821 will make in interest. But that is how the rules work.

Discounts on Council Tax - part four

This article was created: 15 November 2006.
This article was last edited: 19 March 2007.

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