How Much Can Universal Credit Deduct for Council Tax Arrears?
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
Worried about your council tax debt? Not sure how much Universal Credit can deduct for council tax arrears? In this article, you will:
- Find out what happens if you can’t pay your council tax.
- Learn about council tax bands and who has to pay.
- Discover ways to possibly write off some council tax debt.
- Understand how non-payment of council tax might affect your credit score.
- Learn about the legal outcomes of not paying council tax.
Each month, over 170,000 people seek advice from our website on handling debt, so you’re not alone. We understand how you feel and are here to guide you. This article will give you the facts without causing extra worry.
Let’s get started.
What Is Universal Credit?
Universal Credit is paid to people with a low income, to help them meet their living costs. It is paid monthly (sometimes once every 2 weeks in Scotland). In the UK, Universal Credit replaced a whole range of separate benefits, including:
- Working tax credit.
- Child tax credit.
- Employment and support allowance.
- Income support.
- Jobseekers allowance.
Who Is Eligible?
If you are out of work, physically cannot work, or only earn only a little, then you may be able to get Universal Credit to help you to meet your living costs. In order to be eligible to claim Universal Credit, you must:
- Be a UK resident.
- Be 18 years old or over.
- Not be over your state pension age.
- Have investments and savings that total less than £16,000.
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How Much Is Deducted To Cover Arrears?
If you have to pay council tax, then you cannot simply not pay and expect to get away with it. The council will take actions similar to those used by a debt collection agency like PRA Group or Cabot Financial, to get you to pay your council tax arrears.
If you fall behind with council tax payments, the local authority will send you a letter, asking you to make a payment within 7 days. If you don’t make a payment, then the council may then ask you to pay the entire outstanding balance for the year’s council tax, and withdraw the facility for you to pay in 10 monthly instalments.
The council tax year runs from April 1st, through to March 31st. You will only be sent two reminders in any council tax year. If you go over this limit, the entire amount of council tax you owe for the year will become due.
In some cases, the council may apply to the Department for Work and Pensions (DWP) to collect your council tax arrears directly from your Universal Credit payments. However, the maximum amount that can be deducted from your Universal Credit entitlement in this manner, is just 5% of the total you receive.
There is something of a trap here though. Even if the DWP grants permission for the council to collect council tax arrears in this way, it is highly unlikely that just 5% of your Universal Credit will cover the repayments in full. You would likely still be racking up additional council tax arrears unless you make additional payments. So what might initially be seen as a win, paying just 5% of your Universal Credit to the local authority, is actually a loss in the long run. But this can be a way for you to get a little breathing space to sort your finances out.
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What Happens If I Don’t Pay?
If you don’t pay your council tax, your council may send you some reminders and the option to create a repayment plan.
If you carry on ignoring the council and still don’t pay your tax, your council can apply to get a CCJ against you.
A County Court Judgement (CCJ) is an order from a judge that states you have to pay the debt. This means that the court agrees with your council, and you owe the money.
Your judgement will include the following:
- How much you owe
- How you should pay
- Who you should pay
- Your deadline to pay.
Unless you pay within one month of the CCJ being issued, it will be recorded in the Register of Judgements, Orders and Fines for 6 years. If you pay off your debt within these 6 years, you can request that your judgement is marked as ‘satisfied’ on the register.
CCJs are also visible on your credit file for 6 years. This will make it almost impossible for you to get credit during this time.
If you don’t comply with the CCJ, the council can go back to the court to get an Attachment of Earnings Order (AEO). An AEO against you means that money is to be taken from your wages or salary to be given to your council.
This will continue until all of your debt has been paid.
It is the court that will decide how much you have to pay, and your employer will be legally obliged to take this money out of your pay. But there are a few exceptions to when an order will be granted.
I have listed some of these exceptions below.
- You owe the creditor less than £50.
- You are registered as self-employed.
- You are currently unemployed.
- You are currently serving as a member of the UK armed forces.
- You work on a boat (although not a fishing boat).
What is the Council Tax Reduction Scheme?
The Council Tax Reduction Scheme or the Council Tax Support Scheme is one way of lowering your council tax bill if you can’t afford to pay it.
Keep in mind that not everyone is eligible, but you can reduce your bill by up to 100%. You don’t need to be a renter or homeowner to apply, and you also don’t need to have a particular employment status.
The reduction that you get depends on:
- Your local council – each council has their own process and scheme
- Your personal circumstances – how many dependents you have, your benefit entitlement, etc
- Your total household income
- If your children live with you
- If other adults live with you.
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Where To Go for Help if You Think It’s Wrong?
If you are on a low income, or cannot work at all, then juggling your finances is probably one the biggest problems you face. But luckily, everyone in the UK has access to financial advice. And this includes advice about querying the cost of your council tax, or discrepancies with Universal Credit payments.
If you are dealing with council tax debts or just struggling to manage your money, I recommend speaking to a debt charity.
There are several charities and organisations in the UK that offer free debt counselling services and free financial advice. Their advisors will be able to walk you through your options and find the best solution for you.
