Integrating council tax support into universal credit: What does the government need to consider?

This article was originally published in Public Sector Executive on 01 May 2026 and is reproduced here with kind permission.

Found in a dusty and often-overlooked corner of the UK’s benefit system, council tax support (CTS) – a means-tested reduction to council tax for low-income households – is perhaps not the most high profile of topics. However, its arcane and complex design means CTS has more to teach us about benefits in the UK than a cursory glance may reveal.

Whereas most benefits in the UK are set by the Department for Work and Pensions and administered centrally, CTS is devolved to local authorities in England and the devolved governments in Scotland and Wales. It is by far the largest devolved benefit in England. In her Mais lecture last month, the Chancellor revealed her plans for  ‘a roadmap for future fiscal devolution.’ While it is now an outlier in the UK benefit system, perhaps CTS will soon be the torch-bearer for a more common approach.

CTS is not big, making up just a small fraction of total benefit spending. However, it is highly targeted at the lowest income households many of whom will not have to pay any council tax at all. For the poorest tenth of households, it contributes on average over £500 per year in 2025-26 prices, or over 5% of their income.

It is separate to universal credit, the main means-tested benefit for working-age families in the UK. 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. With any means-tested benefit, claimants face weaker incentives to work because their benefits are withdrawn if they earn more. If you claim universal credit, for example, you normally will keep only 45p of a £1 increase in your after tax pay. This is already quite a large disincentive to work. Under a typical scheme, if you were on both universal credit and CTS, you’d expect to keep just 36p for each extra pound you earn, because you lose some CTS in addition to losing some universal credit. Effects like this might put people off working more hours or taking higher paid jobs.

Increasingly, where you live also matters for how much you get.

Before 2013-14, the scheme was designed nationally: two identical households with the same income would get an equivalent reduction in their council tax bill no matter where they lived. Since then, reforms made by local authorities in England have reduced the size of working-age CTS schemes by around £630 million (14%). These cuts have hit the poorest households most, reducing their disposable incomes by £106 a year (or 1%) on average. In Scotland and Wales meanwhile, local reforms have left generosity little changed. 

But the cuts in England are not the same everywhere; local authorities have begun to adopt much more diverse – and sometimes inscrutable – systems. Now each local authority has to design and administer their own scheme, meaning many costs are duplicated across the country. One common new choice of scheme design can be less generous to some groups than others with no clear rationale. Working renters, for example, sometimes lose out compared with otherwise-identical working homeowners, while the same difference is not replicated between renters and homeowners who are out of work. 

If the government wanted, it could integrate working-age CTS into universal credit. The support could be made into an ‘element’ of universal credit, alongside other elements such as those to support with rent, children, and health problems.

Indeed, there are good reasons to integrate. Having one integrated system would make it easier for claimants to understand what benefits they are entitled to. It would also reduce the administrative burden on local authorities and could strengthen work incentives for most low-income households.

However, localisation allows policymakers to tailor schemes to the needs or preferences of their population and to reflect other local constraints. Local authorities would lose control of their only lever to redistribute income at scale, if CTS were integrated. And there would be risks to local authority finances if integration wasn’t handled correctly.

This highlights this fundamental trade-off in devolving benefits. Devolution enables local authorities to tailor the level of support they provide to their local areas. But this flexibility comes at the cost of more complication for claimants and increased work to administer the benefit. The government should bear this trade-off in mind as it considers broader fiscal devolution in England. As policymakers decide what to devolve, there is much they can learn from council tax support.