Council Tax Support (CTS) is one of the least understood parts of the benefits system, despite being worth hundreds of pounds a year to low-income households.
Now experts at the Institute for Fiscal Studies (IFS) say the Government should consider merging Council Tax Support into Universal Credit – a move that could make claiming easier and potentially boost work incentives for millions.
The DWP benefit many Universal Credit claimants don’t realise they need to claim
Many people assume that if they receive Universal Credit, any help with council tax will automatically be included.
But that is not the case.
Unlike Universal Credit, Council Tax Support is run by local councils, meaning claimants often have to make a separate application.
The result is a system that can leave people confused about what help they are entitled to receive.
Matthew Oulton, Research Economist at the Institute for Fiscal Studies, said in a new article: “Because there are two schemes with different eligibility criteria, administered by different bodies, it is harder for would-be claimants to know what they are entitled to.”
For some households, the support can make a significant difference.
According to the IFS, Council Tax Support contributes more than £500 a year on average to the incomes of the poorest tenth of households, accounting for more than 5% of their income.
Why your postcode could affect how much help you get
One of the biggest issues facing claimants is that support is no longer the same across the country.
Before 2013, households with identical circumstances would receive the same level of council tax support regardless of where they lived.
That changed when responsibility was handed to local authorities.
As a result, councils now operate different schemes, meaning two families with the same income can receive very different levels of support depending on their postcode.
The IFS says reforms introduced by councils in England have reduced support by around £630 million overall, with the poorest households losing an average of £106 a year.
Meanwhile, Scotland and Wales have largely maintained previous levels of support.
The hidden impact on Universal Credit payments
Experts also warn the separate system can create financial disincentives for people trying to increase their earnings.
Universal Credit already reduces as income rises.
Under current rules, claimants generally keep 45p of every extra £1 earned after tax because their Universal Credit payment is reduced.
But when Council Tax Support is added into the equation, many households keep even less.
The IFS estimates that some claimants receiving both benefits may keep just 36p of every extra £1 earned because both forms of support are withdrawn as earnings increase.
Critics argue this can discourage people from increasing their hours or taking higher-paid jobs.
Could Council Tax Support be added to Universal Credit?
The Government has not announced plans to merge the schemes, but the issue is gaining attention as ministers explore wider reforms to local government funding and fiscal devolution.
The IFS suggests Council Tax Support could potentially become another element within Universal Credit, alongside existing support for housing costs, children and health conditions.
Supporters say this would make the benefits system easier to understand and reduce administration costs.
Mr Oulton said: “Having one integrated system would make it easier for claimants to understand what benefits they are entitled to.”
He added that it could also strengthen work incentives and reduce duplication between councils and central government.
Why some councils may resist
Not everyone supports the idea.
Currently, Council Tax Support gives local authorities the flexibility to tailor schemes to local needs and priorities.
If support was folded into Universal Credit, councils would lose one of the few tools they have to redistribute income locally.
Mr Oulton warned there are “fundamental trade-offs” between local flexibility and simplicity for claimants.
What Universal Credit claimants should do now
For now, experts say anyone claiming Universal Credit should check whether they are also eligible for Council Tax Support.
Many councils offer online calculators and application forms, but support is not always awarded automatically.
With Council Tax Support worth hundreds of pounds a year for some households, failing to claim could mean missing out on valuable financial help at a time when many family budgets remain under pressure.
