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What is the ‘bedroom tax’?
The ‘Bedroom tax’ is referred to as a penalty levied if you own a spare bedroom or are renting a council or association property. The bedroom tax is also called the ‘ under-occupancy penalty.’ It can also be referred to as the ‘ removal of spare room subsidy.’ It is often called the bedroom ‘size criteria rule.’
The coalition government introduced this reform in 2013 under the Welfare Reforms Act 2012.
Why was the bedroom tax introduced?
The government aimed to free up housing to accommodate more than 300,000 people. This tax came into effect on April 1, 2013.
It is regarded as a welfare reform that reduces housing benefits if the household has a spare bedroom. The policy was aimed to encourage social and council housing tenants residing in larger properties to move to smaller households. Consequently, it would lead to the freeing of space to accommodate larger families who live in congested areas.
According to the analysis of the Department of Work and Pensions (DWP), more than 30 percent of tenants have moved home by 2017.
Who needs to pay the bedroom tax?
You will need to pay the bedroom tax if
- Your household has a spare bedroom
- You are receiving a Housing benefit on your social or council housing
- You are renting out your council or housing property
- You have attained a working age, i.e., you are aged above 16 but are below the minimum State Pension credit age
- Couples that reached the state credit pension age and are living together are not liable to pay the bedroom tax.
The bedroom tax isn’t a ‘tax,’ but it is rather the benefits that are reduced from the Htaxousing credit, so you receive less Housing benefits.
How do you know if you own a spare bedroom?
If the penalty applies to you, there are specific criteria that need to be checked by the council. The council would check the number of rooms, including the number of people residing in the household.
If you reside in a council or social housing and owe a bedroom tax, you would receive Housing benefits.
The council further checks if the bedroom in your household can be shared. It is checked based on specific criteria, which are listed below.
- If you have two children of the same gender aged below 16, they are expected to share the same room.
- Two children, irrespective of their gender, aged under 10, are expected to share the same room.
- People aged above 16 or couples residing in a household can have one room.
- A non-resident carer or a group of carers for a person or a disabled child receiving a qualifying disability benefit is also entitled to have his own room.
- Any child who has their main home elsewhere is allowed to have one room.
However, the room will not be counted as a spare room if it is used by a student or a member of the armed forces and who is planning to return back home.
If, after someone’s death, a spare bedroom has come, the bedroom tax will not be liable until a year.
It must also be noted that every room in the household is counted as a bedroom even if it is used for other purposes.
How much is the bedroom tax?
The bedroom tax is recovered by reducing the maximum rent or the eligible rent that can be covered by housing benefits. Eligible rent is referred to as the amount that is paid as a standard rent for a property.
If you have one spare room, you are entitled to a 14 percent reduction in the maximum rent. However, if you own two extra rooms, you are entitled to a 25 percent reduction in the maximum rent.
For instance, if you rent a room for £100 per week, the maximum rent you would receive will be £86 for one spare room. For two extra rooms, it would be £75. Moreover, if your rent is less than the benefit, you are liable to pay the shortcoming.
This reduced amount is then used to determine your Housing Benefit or Universal Credit.
The council might reduce the tax if you reside with someone who shares the rent. The council might also take more bedroom tax if you are receiving other benefits as well.
One can also challenge the council’s decision within a time period of one month.
Who does not owe to pay the bedroom tax?
The bedroom tax is not levied on everyone who receives a Housing Benefit. Some people are exempted from paying the bedroom tax. They include couples who have attained their state pension age and live together or people living in a shared property or a supported accommodation. A supported living also called sheltered living, is an accommodation where the landlord provides support as a part of your rent. Moreover, people residing in temporary accommodation, mobile homes or houseboats, or homeless people living in temporary housing are also exempted from the under-occupancy penalty.
A supported living is an accommodation where the landlord provides support as a part of your rent.
How to avoid paying the bedroom tax?
- A friend or a family member can move into your spare room. This could help you from paying any bedroom tax. But in most cases, your housing benefit is still reduced to contribute to the bedroom tax.
- You can rent the spare room to a lodger. However, the rent he pays should be counted as a part of your income.
Further, you can also move to a smaller housing association to avoid paying tax.
Do pensioners need to pay the bedroom tax?
No, the adult couple who have attained the minimum State Credit Pension age are exempted from paying the bedroom tax.
Recently, it was announced to extend this reform to pensioners as well. However, the decision was taken back after it faced great public criticism.