Local Council Tax Reduction Scheme for working age people

Below we explain the proposed changes.

Introduction of an income banded system

We’re suggesting a new Income banded system that would start on 1 April 2026 for the new Council Tax year.

The changes would only affect working age people. 

We have four options about how a new system could work and we are keen to understand your views about these. 

• Option 1a: Income Banded CTR Scheme with no minimum contribution
• Option 1b: Income Banded CTR Scheme with a minimum of 10% contribution to Council Tax bill  
• Option 1c: Income Banded CTR Scheme and a minimum of 20% contribution to Council Tax bill  
• Option 1d: Income Banded CTR Scheme and a minimum of 25% contribution to Council Tax bill

The introduction of a banded scheme and the options would work the same, except options 1b – 1d would mean that all households would have to pay a contribution towards their Council Tax. 

For each option, we would replace the current complicated calculation of the amount of ‘earnings disregard’ for different types of households such as couples, people with disabilities, carers, lone parents etc, with a new standard ‘earnings disregard’ of £10 per week.

We have shown below examples of how this might affect households in the future. The examples are calculated using an average weekly Council Tax charge. The amount may be less or more depending on your Council Tax Band. 

Option 1a: income banded scheme with no minimum contribution

We would ignore:

• your DWP benefits including Universal Credit (UC)
• any unearned income in your UC assessment, if you qualify for UC

We would count:

• your and any partner’s earnings (minus the new standard ‘earnings disregard’ of £10 per week)
• other income like pensions or savings

We would then compare your weekly income, for example:

What this would mean for households

• Small changes in income that will not lead to new bills, as your income is more likely to stay within the income bands, meaning there is no change to the percentage of discount they receive.
• It would be easier to understand
• It also protects larger families from losing support if benefit rules change, by not having the level of support you receive based upon the size of your family.
• This change would also mean that working age claimants would have to pay between 0% and a maximum of 75% (£25.50 on average) of the Council Tax bill.

What it would mean for us

The new scheme would cost the same as the current one but would be easier to understand and manage.

Example for a household

The current scheme:

• Mr X lives with his partner and two children.
• He works part-time and earns £180 per week
• They get £1,434 per month in Universal Credit
• They also get £88 per week in Personal Independence Payment (PIP)
• Their Council Tax is £30 per week
• They currently get £11.79 off their weekly Council Tax and pay £18.21

Under the new scheme:

• UC and PIP are ignored
• His earnings are counted as £170 per week (after the £10 is taken off)
• This puts him in the 50% discount band

So, they get £15 off their weekly Council Tax and pay the remaining £15 themselves.

Option 1b: Income Banded CTR Scheme and a minimum 10% contribution to their Council Tax bill 

This would be the same as the option 1a, but with the following differences.

We compare your weekly income, for example:

What this would mean for households

This change would mean that working age claimants would have to pay a minimum of 10% of their Council Tax bill (£3.40 per week on average) up to a maximum of 75% (£25.50 per week on average).

What this would mean for us

This will reduce the cost to run the scheme by approximately £3.8million per year to help us balance the budget.

Option 1c: Income Banded CTR Scheme and a minimum 20% contribution to their Council Tax bill 

This would be the same as the option 1a, but with the following differences.

We compare your weekly income to this table:

What this would mean to households

This change would mean that working age claimants would have to pay a minimum of 20% of their Council Tax (£6.80 per week on average) up to a maximum of 75% (£25.50 per week on average).

What this would mean to us

This will reduce the cost to run the scheme by approximately £7.9 million per year to help us balance the budget.

Option 1d: Income Banded CTR Scheme and a minimum of 25% of the Council Tax bill to pay 

This would be the same as the option 1a, but with the following differences.

We compare your weekly income to this table:

What this would mean for households

This change would mean that working age claimants would have to pay a minimum of 25% of their Council Tax bill (£8.50 per week on average) up to a maximum of 80% (£27.20 per week on average).

What this would mean for us

This will reduce the cost to run the scheme by approximately £10.3 million per year to help us balance the budget.

Removal of the Second Adult Reduction (2AR)

If the proposal to move to an income banded system for working age households was agreed, we would also have to remove the 2AR. 

The 2AR is a type of Council Tax support for people who do not qualify for regular CTR because their income or savings are too high, live with another adult (not their partner or a dependent) who has a low income.

This other adult is called a 'second adult', and if they were the one responsible for the bill, they may qualify for help.

Depending on the second adult’s income, the bill payer can get a reduction of 7.5%, 15%, or 25% off their Council Tax bill.

The bill payer’s own income or savings don’t affect this discount.

What is being proposed

To create a new fairer and more efficient system that uses income bands, we propose this support is removed as currently, bill payers may have significant income or savings and still qualify for CRT support through 2AR.

The new scheme will decide how much help someone gets based on their personal income and circumstances.

• 380 households in the county currently receive 2AR.
• It costs the council £133,000 a year.
• If the bill payer has a low income themselves, they can still apply for CTR.
• More than 70% of other local councils have stopped offering this type of support because it does not take the bill payer’s personal situation into account.  

Changes to non-dependant deductions

A non-dependant is an adult (over 18) who lives with you but is not classed as a dependent child, such as a grown-up child or a friend.

Right now, if you get CTR, the amount you receive can be reduced based on how much money the non-dependant earns. You have to provide proof of their income and tell us if their situation changes. 

Almost 1,000 households have a non-dependant deduction from their CTR.

What is being proposed

A weekly deduction of £10 for each non-dependant, no matter how much they earn.

Currently non-dependant deductions are not made if the non-dependent is a student, or if you or your partner get the daily living part of PIP or a similar benefit.

This change would make the system simpler and reduce how often people need to report changes.

The £10 deduction

The current National Living Wage is:

• £12.21 for people aged 21 and over
• £10 for people aged 18 to 20

So, we believe that £10 deduction is a fair flat rate.

Lowering the ‘savings’ (Capital) allowance

At the moment, if you’re working age and applying for CTR:

• you can have up to £16,000 in savings
• if you have between £6,000 and £15,999 in savings, £1 per week for every £250, over £6,000, is counted as income

Why change this?

A 2024 UK savings report shows:

• 1 in 3 adults have less than £1,000 in savings
• 65% have less than 3 months’ worth of expenses saved

 What is being proposed

Lower the savings limit from £16,000 to £6,000.

This would impact 425 households in the county who currently receive CTR, which is just over 1% of households claiming a Council Tax reduction.

The tables have been added as images and do not comply with accessibility legislation.

If you need help to read or understand this information, please contact LTCRConsultation@durham.gov.uk