Quantcast
Menu
Save, make, understand money

Household Bills

Warning: £150 council tax rebate can offset arrears and overdrafts

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
17/03/2022

The government’s £150 council tax rebate to cover rising energy bills can be applied to arrears, and banks could offset the sum against overdrafts, YourMoney.com can reveal.

From April, households in England which are in council tax bands A-D will receive a £150 rebate to help with rising energy bills.

It is expected to apply to around 80% of homes in England – benefitting around 20 million households. Similar schemes are also running in Scotland and Wales.

This non-repayable sum will be made directly by local authorities. Where it holds direct debit details, the one-off payment will be made directly to bank accounts.

However, where billing authorities don’t have these details, they are expected to ask residents for the information so the £150 can be paid.

Guidance from the Department for Levelling Up, Housing & Communities to local authorities in England states that they should offer residents the choice to receive the support up-front rather than as a credit on their council tax account.

But they can automatically credit the £150 to eligible households’ council tax accounts where current payment details aren’t held, “as a backstop option”.

The guidance reads: “Councils can specify that if households do not respond when given a choice of payment method by a certain date, they will take this as an indication that the household wishes to receive the support as a council tax account credit. Councils should make clear which council tax account the money will be credited to. It is for councils to determine an appropriate timescale to allow for response – up to and including the 30 September 2022 – and the number of reminders (if any) that are appropriate prior to making any automatic credits.”

Further, a lack of response from eligible households could mean the £150 is applied to council tax arrears.

“Where a household that is eligible for support chooses to receive this [£150] as a credit to their council tax account (or this is applied as a backstop option), councils can choose whether to allocate this to the financial year 2022/23, or to any arrears. This should be made clear when giving households the option to receive support as a council tax credit. As with other eligible households, households in arrears can choose instead to receive a direct payment. Credits should not be allocated to future years’ liability (eg. 2023/24 onwards),” it states.

According to charity Citizen’s Advice, council tax arrears are its second largest debt issue after fuel debts. Between March 2019 and February 2022, it has helped 238,947 people with council tax arrears.

It estimates that 3.5 million people are in council tax arrears with an average debt of £800. It estimates the total value of council tax arrears as over £3bn.

Households in overdraft

Where payments are made directly to bank accounts, there is a chance the lenders could offset it against overdrafts or other bills.

The guidance states: “Councils may wish to provide information as part of their application process on how eligible households can exercise their first right of appropriation on the £150 payment, so their bank doesn’t use it to pay off any overdraft.”

It points people to National Debtline’s Ask your bank to pay particular bills out of your account sample letter. This letter allows you to ask your bank to pay particular bills out of your account from money you have paid in.  This should prevent the £150 being offset against any overdraft with the bank account linked to your council tax direct debit payment or bank account details given for the sum.