Supplementary memorandum by Halton Borough
Council (CTB 23)
ADDITIONAL INFORMATION
REGARDING THE
EFFECT OF
TAPERS IN
HOUSING BENEFIT
AND COUNCIL
TAX BENEFIT
Detailed below is a worked example of the effect
tapers can have on a person's claims for benefit.
Initially it is important to understand the
following terms.
Applicable amount: This is the figure used to
calculate both Housing Benefit and Council Tax Benefit. It is
to reflect what a claimant and any members of their family are
supposed to live on. It is made up of personal allowances and
any premiums, which may or may not apply. It is based on individual
circumstances, (age, dependants etc).
Assessed Income: This is the figure used in
the calculation of HB and CTB. There are a whole raft of rules
and regulations concerning how individual types of income are
treated. Some is disregarded in full, some has an earned income
disregard applied to it, etc.
If a claimant is in receipt of Income Support
or JSA (income based) or the Guarantee Pension Credit then their
income is treated as being below their applicable amount and hence
they are awarded the maximum benefit.
If the claimant is not on one of the above then
the Local Authority calculates their applicable amount and also
their assessed income for benefit purposes. When calculating a
persons assessed income there are many disregards to be applied
ie income that is not taken into account, for example, war pensions
or earned income disregards.
As the income increases above their applicable
amount the amount of benefit is withdrawn via a taper.
The tapers at present are 20% for Council Tax
and 65% for Housing Benefit.
This is where the problem starts. When people
start to move above these applicable amounts, the rate that they
are taken out of benefit is extremely steep, thereby creating
what used to be known as the "poverty trap". This is
where if your income takes you above your applicable amount it
needs to take you well above it otherwise any increase in assessed
income is negated by a reduction in benefit.
At the Enquiry I mentioned that if a claimant
had a £5 increase in income they could lose £4.25 in
benefit. This is illustrated in the worked example below.
Example
Claimant
Applicable amount is £150
Assessed Income £160
Their income exceeds their applicable amount
by £10
Rent £95
Council Tax £5
Taking into account the above, the calculation
would be:
Housing Benefit
65% of £10 = £6.50 which is deducted
from the maximum benefit of £95.
This gives Housing Benefit of £88.50
Council Tax Benefit
20% of £10 = £2.00 which is deducted
from the maximum benefit of £5
This gives Council Tax Benefit of £3
It does not matter if the claimant is a young
person or a pensioner or has a large family. In the above example
a £5 increase in assessable income (remember there are lots
of rules around how you calculate this) would have the following
effect.
Applicable amount is £150 (unchanged)
Assessed Income £165 (£5 increase)
Their income exceeds their applicable amount
now by £15
Rent £95 (unchanged)
Council Tax £5 (unchanged)
The calculation would be:
Housing Benefit
65% of £15 = £9.75 which is deducted
from their maximum benefit of £95.
This gives Housing Benefit of £85.25
Council Tax Benefit
20% of £15 = £3.00 which is deducted
from their maximum benefit of £5
This give Council Tax Benefit of £2
Hence:
Initially the claimant had a total benefit of
£91.50 consisting of £88.50 HB and £3 CTB.
They had a £5 increase in their income.
Their new benefit is £87.25 consisting
of £85.25 HB and £2 CTB.
This is a reduction of £4.25, which is
85% of the increases of £5.
ie the claimant only receives 0.75p of the £5
increase in income.
| 
