Council Tax Reduction - how your capital is worked out if you’re a pensioner
To work out whether you're entitled to Council Tax Reduction (CTR) and how much you’re entitled to, your local authority may need to look at how much capital you have. Capital is things like savings and some types of property.
If you’re a pensioner, the Government has set out rules about how your local authority should work out your entitlement to CTR.
Read this page to find out more about how your capital affects your entitlement to CTR, if you’re a pensioner.
What you need to know
If you're a woman, the age you can get Pension Credit is the same as your state pension age.
If you're a man, the age you can get Pension Credit might be different from your state pension age.
The GOV.UK website has an online calculator which tells you when you can get Pension Credit, available at www.gov.uk
Who is a pensioner?
When you claim CTR, you’re considered to be a pensioner if you’ve reached the age when you can get Pension Credit. This doesn’t actually mean you must be getting Pension Credit – just that you’ve reached the age when you are entitled to make a claim.
The rules about how CTR is worked out if you’re a pensioner depend on whether:
- you get Pension Credit
- you get the guarantee part of Pension Credit
- you only get the savings part of Pension Credit without the guarantee part.
If you get the guarantee part of Pension Credit
If you’re a pensioner and either you or your partner get the guarantee part of Pension Credit, you are entitled to a full reduction on your council tax. The local authority will ignore both your income and your capital.
However, if you have a non-dependent adult living in your household, the amount of CTR you get may be reduced.
If you only get the savings part of Pension Credit
If you only get the savings part of Pension Credit but not the guarantee part, your local authority will use the Pension Service's calculation of your income and capital to work out how much CTR you should get. If your capital is more than £16,000 you won't be entitled to CTR.
What happens if your capital was under £16,000 but rises above this level later on?
If you are awarded CTR and your capital goes above £16,000 later on, you should let your local authority know.
If you've been given an assessed income period, the local authority may have to do its own calculation of your capital to see if you're still entitled to CTR.
An assessed income period is a period during which you have been told that you don't have to report changes to your capital to the Pension Service.
If you’re a pensioner but you don’t get Pension Credit
If you’re a pensioner but you don’t get Pension Credit, you may still be entitled to CTR, although you might not get the full amount. The local authority will need to work out your income and capital.
If your capital is more than £16,000 you won't be entitled to CTR.
If you have capital of less than £16,000
If you have capital of £10,000 or less, this will be ignored when working out whether you’re entitled to CTR.
If you have capital of between £10,000 and £16,000, the local authority will treat it as income. This is known as tariff income. The local authority will assume you have an income of £1 a week for each £500 of capital between £10,000 and £16,000. This will be added to your other income to work out whether you’re entitled to CTR and how much you’re entitled to.
What counts as capital?
The main types of capital are:
- savings, including stocks, shares and ISAs
- life insurance policies
- most lump sum or one off payments, including a redundancy payment or compensation for unfair dismissal or discrimination
- national savings certificates and premium bonds
- most property you own other than the house you live in.
If you own capital jointly with someone else
If you own capital jointly with someone else who isn't your partner, you will usually be treated as owning half.
For example, if you have a joint savings account with your son worth £16,000, you will be treated as having savings of £8,000.
However, if you share the account with your partner, you will be treated as having savings of £16,000.
How the value of capital is worked out
When the local authority works out how much your capital is worth, it values it at the market value. It will take off ten per cent to cover your sale expenses, if you have any.
If you have a property with a mortgage left to pay off or a secured loan against it, the value of the mortgage or loan will be taken off the value of the property. This means, for example, that if you owe more on your mortgage than your property is worth, your property won't be counted as part of your capital.
Capital outside the UK
If you own capital outside the UK, it will be valued at the market value in the country where the capital is. For example, if you own property in France, it will be valued at the market value in France.
However, some countries won't allow you to transfer the proceeds from a sale of capital back to the UK. If you're in this situation, your property would be valued at the amount a UK buyer would pay for it.
In some cases you can be treated as owning capital you do not have. This is called notional capital. This may happen if you have deliberately spent or given away capital, especially if you did this so that you would be entitled to CTR.
What if you have too much capital?
If you’re not entitled to CTR because you have too much capital, you may still be entitled to second adult rebate. You can only get second adult rebate if you have another adult living with you and only if this is a certain type of adult.