Guidance

The Collection Fund (Council Tax Reductions) (England) Directions 2024

Published 16 August 2024

Applies to England

Discretionary discounts under section 13A(1)(c) of the Local Government Finance Act 1992

1. At present the full costs of discretionary reductions made under section 13A(1)(c) of the Local Government Finance Act 1992 are borne by the billing authority in accordance with the Collection Fund (Council Tax Reductions) (England) Directions 2022 (‘the 2022 Directions’).

2. The Tax Credit system is due to close in April 2025. As part of that closure programme its remaining pension age tax credit recipients will receive a notice asking them to either move to Pension Credit (notices being issued from July 2024 onwards) or Universal Credit (notices being issued from September 2024 onwards) depending on their circumstances. Those who are currently eligible for pension-age Council Tax Reduction but who move to Universal Credit have the potential to see their council tax bills rise. This is because the Council Tax Reduction Schemes (Prescribed Requirements) (England) Regulations 2012 specifically exclude people who receive (or whose partner receives) Universal Credit from receiving pension age council tax reduction, and locally designed working age schemes may provide smaller reductions to applicants.

3. The number of affected pensioners is likely to be small and limited to those who are self-employed and earning a very low income, and/ or those who have deferred their state pension.

4. The Local Government Finance Act 1992 (‘the 1992 Act’) does not permit in-year changes to billing authorities’ Council Tax Reduction schemes, and it is therefore not possible to legislate to prevent such impacts from occurring during 2024-25.

5. To protect the Council Tax Reduction of affected pension age applicants during 2024-25 the government will encourage billing authorities to offset any impacts through the provision of discretionary discounts made under section 13A(1)(c) of the 1992 Act.

6. To facilitate this, the 2022 Directions are being revoked and replaced. The new Directions specify that where a discount is provided in relation to one or more days between 1 September 2024 and 31 March 2025 and all the following circumstances apply, the billing authority need not make a payment into the collection fund:

• an applicant for Council Tax Reduction was in receipt of Working Tax Credit
• following receipt of a Migration Notice relating to the closure of Working Tax Credit on any date between 1 September 2024 and 31 March 2025 (inclusive) the applicant has migrated to Universal Credit
• had that migration not taken place the applicant would have been eligible for a pension age council tax reduction
• due to that migration the applicant is no longer eligible for that reduction
• the applicant is either eligible for a working age council tax reduction which is smaller than that they would have received had they remained eligible for a pension age reduction; or they are not eligible for any reduction
• the billing authority provides a discretionary reduction under section 13A(1)(c) of the 1992 Act to reduce the applicant’s council tax liability to the level it would have been had the applicant remained eligible for a pension age reduction

7. The net impact of this measure will be that billing authorities and major preceptors will receive the same amount of income as if there had been no Universal Credit-related impact on the applicant’s council tax reduction during 2024-25.

8. The government intends to amend the Council Tax Reduction Schemes (Prescribed Requirements) (England) Regulations 2012 in due course so that from financial year 2025-26 onwards applicants who have migrated to from Working Tax Credit to Universal Credit remain entitled to claim pension age support.

9. The government’s policy is that the costs of discretionary discounts provided for other purposes under section 13A(1)(c) must continue to be borne by the billing authority.

10. The new directions are attached at annex A.

Annex A: The Collection Fund (Council Tax Reductions) (England) Directions 2024

1(1). The Secretary of State, in exercise of his powers under section 98(4) to (6) of the Local Government Finance Act 1988, hereby makes the following directions.

1 (2). From 1 September 2024, the directions contained below (CT98(4)/2024/1, CT98(4)/2024/2, CT98(5)/2024/1 and CT98(5)/2024/2) have effect for the remainder of the financial year 2024-25, and for subsequent years.

1 (3). Directions (CT98(4)/2022/1, CT98(4)/2022/2, CT98(5)/2022/1 and CT98(5)/2022/2) made under sections 98(4) to (6) of the Local Government Finance Act 1988 (on 11 April 2022) are revoked from 1 September 2024 in relation to the remainder of the financial year 2024-25 and subsequent years, but shall continue to have effect both in relation to the financial year 2024-25 prior to 1 September 2024 and previous financial years, and in so far as is necessary for calculations under any other direction.

2 (1). In these directions –

“applicant” has the meaning given in Regulation 2 of the Council Tax Reduction Schemes (Prescribed Requirements) (England) Regulations 2012.

“the 1988 Act” means the Local Government Finance Act 1988,

“the 1992 Act” means the Local Government Finance Act 1992,

“instalment day” means:-

(a) a day on which an amount is or will be transferred from the authority’s collection fund under section 97(1) of the 1988 Act in accordance with the Local Authorities (Funds) (England) Regulations 1992 (S.I. 1992/2428),

(b) where no such amount is or will be so transferred in the financial year in question, the first working day in May and in each subsequent month up to and including February in that year,

and (in either case) the last working day of the financial year in question.

“migration notice” has the meaning given by Regulation 44 of the Universal Credit (Transitional Provisions) Regulations 2014.

“pension age applicant” means a person applying for a council tax reduction
who has attained the qualifying age for state pension credit.

“pension age council tax reduction” means a reduction granted to a pension age applicant under the part of a billing authority’s council tax reduction scheme which relates to persons of pension age.

“relevant reductions” means reductions granted by the billing authority under section 13A(1)(c) of the 1992 Act, excluding reductions in relation to one or more days between 1 September 2024 and 31 March 2025 (inclusive) to fully reverse an increase in the council tax liability of a Council Tax Reduction applicant when all of the following circumstances apply

• an applicant for Council Tax Reduction was in receipt of Working Tax Credit;
• following receipt of a Migration Notice relating to the closure of Working Tax Credit on any date between 1 September 2024 and 31 March 2025 (inclusive) the applicant has migrated to Universal Credit;
• had that migration not taken place the applicant would have been eligible for a pension age council tax reduction;
• due to that migration the applicant is no longer eligible for that reduction;
• the applicant is either eligible for a working age council tax reduction which is smaller than that they would have received had they remained eligible for a pension age reduction; or they are not eligible for any reduction; and
• the billing authority provides a discretionary reduction under s13A(1)(c) of the 1992 Act to reduce the applicant’s council tax liability to the amount it would have been had the applicant remained eligible for a pension age reduction.

“Universal Credit” has the meaning given by section 1 of the Welfare Reform Act 2012.

“Working age council tax reduction” means a reduction granted under the part of a billing authority’s council tax reduction scheme which relates to persons who are not pension age applicants.

“Working Tax Credit” means a working tax credit under section 10 of the Tax Credits Act 2002.

Direction CT98(4)/2024/1 under section 98(4) of the 1988 Act: adjustment of reduced amount of council tax under section 13A(1)(c) of the 1992 Act

3. The Secretary of State hereby directs that a billing authority shall transfer to its general fund from its collection fund the amount (if it is a positive amount) calculated in accordance with the following formula –

A – B

where –

A is the total of the amounts calculated by the authority in relation to the financial year under direction CT98(5)/2024/1 below,

B is the amount by which the amounts liable to be paid to the authority in respect of council tax as it has effect for the financial year are less than the amounts which would be so payable but for any relevant reductions granted by the billing authority, such amount, if any, to be transferred on the last instalment day of the financial year.

Direction CT98(4)/2024/2 under section 98(4) of the 1988 Act: adjustment of reduced amounts of council tax under section 13A(1)(c) of the 1992 Act for preceding years

4. The Secretary of State hereby directs that a billing authority shall transfer to its general fund from its collection fund the amount (if it is a positive amount) calculated in accordance with the following formula –

A – B 

where –

A is the total of the amounts calculated by the authority in relation to any preceding financial year, under directions CT98(5)/2024/1 and CT98(5)/2024/2 below, less the total of the amounts calculated by the authority in relation to that preceding year under direction CT98(4)/2024/1 above.

B is the amount by which the amounts liable to be paid to the authority in respect of council tax as it has effect for that preceding financial year are less than the amounts which would be so payable but for any relevant reductions granted by the billing authority, such amount, if any, to be transferred on the last instalment day of the financial year.

Direction CT98(5)/2024/1 under section 98(5) of the 1988 Act: reduced amounts of council tax under section 13A(1)(c) of the 1992 Act

5. The Secretary of State hereby directs that a billing authority shall transfer to its collection fund from its general fund the amount (if it is a positive amount) calculated on an instalment day in the financial year in accordance with the following formula –

(A – B) / C

where –

A is the amount, calculated on the instalment day, by which the amounts liable to be paid to the authority in respect of council tax as it has effect for the financial year are less than the amounts which would be so payable but for any relevant reductions granted by the billing authority,

B is the total of the amounts calculated by the authority, under this direction and in relation to the financial year, on instalment days preceding that on which the amount is calculated,

C is the number of instalment days remaining (immediately before the day on which the amount is calculated) in the financial year, such amount, if any, to be transferred on or before the last instalment day in the financial year.

Direction CT98(5)/2024/2 under section 98(5) of the 1988 Act: reduced amounts of council tax under section 13A(1)(c) of the 1992 Act for preceding years

6. The Secretary of State hereby directs that a billing authority shall transfer to its collection fund from its general fund the amount (if it is a positive amount) calculated on an instalment day in the financial year in accordance with the following formula –

A – B

where –

A is the amount, calculated on the instalment day, by which the amounts liable to be paid to the authority in respect of council tax as it has effect for any preceding financial year are less than the amounts which would be so payable but for any relevant reductions granted by the billing authority,

B is the total of the amounts calculated by the authority in relation to that preceding financial year under direction CT98(5)/2024/1 above and under this direction, less the total of the amounts calculated by the authority under directions CT98(4)/2024/1 and CT98(4)/2024/2 above, in relation to that preceding financial year, such amount, if any, to be transferred on or before the last instalment day in the financial year.

Signed by authority of the Secretary of State

Michelle Warbis
Deputy Director

Local Tax and Pensions Division
Ministry of Housing Communities and Local Government

16 August 2024