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Proposals

We are proposing two changes to our Council Tax Reduction scheme for 2024/25:

  • The removal of Minimum Income Floor for self-employed earnings;
  • To disregard the ‘Limited Capability for Work’ element of Universal Credit.

Proposal 1 - We propose to remove the Minimum Income Floor (MIF)

The Minimum Income Floor (MIF) is where the current scheme (following an exemption for the first 12 months) assumes a certain level of self-employed profit, which is linked to the National Minimum Wage. The scheme expects self-employed applicants to be earning the same as an employed person in similar circumstances. If their earnings are less then MIF will be applied, otherwise we will use their actual earnings.            

There are two rates applied currently, they are as follows: 

  • £226.38 for single applicants and couples
  • £129.36 for single parent applicants and carers. 

We are proposing to remove MIF from the scheme and apply actual self-employed earnings.   

The benefits of doing this are:

  • It will make the scheme easier to understand and administer;
  • Applicants will not be penalised if their business is struggling;
  • It will assist more residents; 
  • The proposed change simplifies the administration process and is easy to implement within the scheme.

The drawbacks of doing this are:

  • There will be an additional cost to the scheme.

This option will increase the cost of the scheme by £21,733 and will help 123 residents who will continue to receive the same amount of council tax reduction or will receive more under the proposal.

Proposal 2 - To Disregard 100% of the ‘Limited Capability for Work’ element of Universal Credit

Currently applicants receiving Employment and Support Allowance are treated as a passported claim and therefore receive 85% Council Tax Reduction. When they transfer to Universal Credit, they are awarded a Limited Capability for Work element of £390.06 per month in addition to any other Universal Credit income they are entitled to, this element is applied to ensure they are not financially worse off when claiming Universal Credit.        

Under the current scheme the Limited Capability for Work element is treated as income because Universal Credit is not a passported benefit. This means that when an applicant moves to Universal Credit from Employment and Support Allowance, their Council Tax Reduction entitlement is reduced in most cases from 85% to 50%.

Under the proposed scheme the applicant’s Council Tax Reduction will remain the same when they move over to Universal Credit.

The benefits of doing this are:

  • Applicants will not be financially impacted when moving to Universal Credit from Employment and Support Allowance;
  • It will reduce hardship for some of our most vulnerable residents; 
  • The change is simple and easy to implement within the scheme.            

The drawback of this is:

  • There will be an additional cost to the scheme. 

This option will increase the cost of the scheme by £143,052 and will help 332 residents who will receive the same amount of council tax reduction or more under the proposal.

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