How will banks treat the £150 council tax rebate?
Last month we revealed how the government’s £150 council tax rebate to cover rising energy bills can be applied to council tax arrears, and banks could offset the sum against overdrafts.
The £150 council tax rebate applies to households in England which are in council tax bands A-D. An estimated 80% of homes in England – around 20 million households – are expected to benefit.
Similar schemes are also running in Scotland and Wales.
Where local authorities hold direct debit details, the one-off payment will be made directly to bank accounts.
In guidance issued to local authorities, the Department for Levelling Up, Housing & Communities stated: “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 pointed 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.
We contacted the major banks and building societies to find out how they will treat the £150 council tax rebate.
Here’s what they told us:
Bank of Scotland, Halifax and Lloyds
A payment into an account in an arranged overdraft would be free for the customer to spend as they wish.
Where the payment may have taken someone out of an unarranged overdraft, customers are encouraged to contact their bank to discuss the options available to them. If a customer was in financial difficulty and needed the funds, they would be able to access it for that purpose.
Nationwide Building Society
We want to ensure our members can benefit from the council tax rebate and use it for its intended purpose. Where a member is in an unauthorised position, they should contact us and we will work with them to ensure they can access this rebate. There is no need to write a letter of appropriation to Nationwide.
NatWest and RBS
The £150 will be treated as a normal payment.
We do not have a specific policy for the £150 council tax rebate received by customers, the payment is considered in line with our usual policies for credits and benefit payments made to an account.
Where a customer is in an arranged overdraft, the payment will automatically reduce the amount they owe, however the customer remains free to access the funds.
In the event that the payment is used to redress an unarranged overdraft balance and the customer requires access to the funds, they should contact our team of experts as soon as possible to discuss their options and how we can help.
More details and support for customers struggling with their finances can find more detail at: Money worries | Santander UK.
If Starling customers wish to use the £150 council tax rebate for specific expenditure, e.g. energy bills or other household expenses, we will support this. Customers can contact us at any time to discuss their situation and we will help them as best we can.
TSB are looking at the payment and all its implications for our customers.
We won’t use the £150 to pay off arrears or debt balances in other accounts. If a customer is showing signs of financial difficulty we would engage with them to understand their circumstances, including affordability and any form of vulnerability and agree the most appropriate solution.
If the current account into which the £150 is paid is in overdraft, the payment would reduce the level of the balance within the agreed overdraft limit, the limit would remain in place and the customer would still have the additional £150 available to spend.