Council Tax Reduction income deducts the family's whole income tax, not the tax the schemes allow #2090

Found while fixing Scottish Council Tax Reduction (CTR) income for Carer Support Payment (#1992, fixes #1955).

council_tax_reduction_applicable_income deducts the claimant's and partner's whole income_tax and national_insurance from every income it counts:

tax = add_for_members(
    benunit, period, ["income_tax", "national_insurance"], members
)
income_under_general_rules = max_(
    0, increased_income - tax - pension_contributions
)

The CTR instruments deduct less than that. The working-age and pension-age rules differ.

Working age. The Council Tax Reduction (Scotland) Regulations 2021 (SSI 2021/249) take tax and NI off earnings only. Reg 50(3)(a) reads "Earnings do not include— (a) any amount deducted from them by way of income tax or primary Class 1 contributions under the 1992 Act". Reg 49(6)(b) (applicants with UC) and reg 51(2) (self-employed with UC) do the same. Part 6 Chapter 4 (unearned income, regs 57 to 65) has no tax deduction. So tax on unearned income such as State Pension, private pensions, contributory benefits and Carer Support Payment should not come off. The model takes it off, so CTR is too generous wherever such income is taxed.

Pension age. All three pensioner schemes disregard tax only on income they take into account:

• Scotland, SSI 2012/319 reg 31(12): "In the case of any income taken into account for the purpose of calculating a person's income, any amount payable by way of tax must be disregarded."
• England, SI 2012/2885 Sch 1 para 17(13), and Wales, WSI 2013/3029 Sch 1 para 11(13): "In the case of any income taken into account for the purpose of calculating a person's income any amount payable by way of tax is disregarded."

NI comes off earnings only (SSI 2012/319 regs 33, 36 and 37), and the model's NI is all charged on earnings, so the NI deduction matches. The model's whole-tax deduction is close to the law for tax on counted income. It also deducts tax on income CTR does not count. One example is the taxable Scottish Carer Supplement (SI 2026/93), which SSI 2012/319 reg 27(1)(j)(xxib) excepts. Another is income disregarded under the schedules.

Not yet checked. The English and Welsh working-age schemes: SI 2012/2886 (the English default scheme), the local English schemes, and the WSI 2013/3029 working-age parts.

Related.

• Pension Credit income still omits IIDB, SDA, the AFCS guaranteed income payment and other countable income #1954 records the same issue for Pension Credit (SPC Regs reg 17(10)) and pension-age Housing Benefit (HB (SPC) Regs reg 33(12)).
• Take Housing Benefit earnings disregards from net earnings only #1908 takes HB earnings disregards from net earnings only.
• In Count Carer Support Payment as Council Tax Reduction income #1992 the property test test_council_tax_reduction_income_ignores_the_scottish_carer_supplement adds income tax back before comparing CTR income with and without the supplement. Once this is fixed, tighten it to assert that CTR income itself is unchanged.

Suggested fix. Deduct tax and NI on earnings only, and at pension age also the income tax attributable to counted unearned income. Pension-age HB and PC need the same apportionment (#1954), so a shared helper would fit. Test it with:

• a working-age Scottish carer with taxable State Pension or private pension, whose CTR income should not be reduced by the tax on it;
• a pension-age Scottish carer whose Scottish Carer Supplement tax should not reduce CTR income.

Law texts were fetched from legislation.gov.uk on 2026-10-02 (CLML, valid from 2026-04-01 for the Scottish instruments).

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