Option 4: Changing the taper rate that Local Council Tax Support is withdrawn at
For Housing Benefit purposes, the Government has assessed an income level on which it believes a person, based on their circumstances, should be able to live on. This figure is known as the applicable amount. The Council uses the same applicable amount in the calculation of Local Council Tax Support. Where someone’s income exceeds this applicable amount their Local Council Tax Support is withdrawn at the rate of 30 per cent, which is known as the taper rate. So, for every £1 of income over the applicable amount the maximum Local Council Tax Support is reduced by 30 pence.
The taper rate has remained the same since 2018 and an option would be to change it by either increasing it or decreasing it for example,
- Increasing the taper rate to 35%, would mean that for each extra £1 income a person receives over their applicable amount, their Local Council Tax Support would be reduced by 35 pence.
- Decreasing the taper rate to 25% would mean that for each extra £1 income a person receives over their applicable amount, their Local Council Tax Support would be reduced by 25 pence.
This change would not affect those in receipt of income support, income-based employment support allowance or income-based job seekers allowance or those receiving Universal Credit without earnings as they would continue to receive the maximum Local Council Tax Support available under the scheme.
The benefits of increasing the taper rate are:
- It would reduce the cost of the scheme to the Council.
- It may be considered fair as those whose income is higher than the amount they are expected to live on, would pay more.
The drawbacks increasing the taper rate are:
- It would increase the amount of Council Tax some applicants have to pay.
- It may weaken work incentives for some people as they would have more to pay.
- It could lead to an increase in administration costs to recover the increased additional Council Tax.
The benefits of decreasing the taper rate are:
- It would reduce the amount an applicants would have to pay.
- It may increase work incentives for some people as the amount of Council Tax they have to pay would not increase as much if they started work of their wages increased.
The drawbacks of decreasing the taper rate are:
- It would increase the cost of the scheme for the Council.
Return to Local Council Tax Support Scheme introduction page
