Council Tax Reduction When Self-Employed in County Durham

How Self-Employment Income Is Assessed

If you're self-employed and applying for Council Tax Reduction in County Durham, the council calculates your net weekly income differently from employed applicants.

Your assessable income starts with your gross business earnings, minus:

• Allowable business expenses
• Income tax
• National Insurance contributions

The result is your net self-employment income. The council then applies the standard £25 per week earnings disregard — the same disregard that employed applicants receive. Whatever remains after the disregard is the income the council uses to place you in one of the five income bands.

The Minimum Income Floor

Here's the catch for self-employed applicants: Durham's 2026/27 scheme includes a Minimum Income Floor (MIF). If your actual net self-employment profit is lower than the national minimum wage for your expected working hours, the council treats you as earning the minimum wage amount instead.

This means a self-employed person whose business is making a loss or very low profit doesn't automatically fall into Band 1 (90% discount). The council uses the minimum-wage amount for your expected working hours when applying the MIF.

What Evidence the Council Needs

Self-employed applicants face a heavier evidence burden than employees:

• Audited profit and loss accounts — ideally covering the most recent 12-month trading period
• HMRC self-assessment tax returns — the most recent filed return
• The council's self-employment declaration form — available from Customer Services (03000 26 0000), this standardised form asks for a structured breakdown of your income and business expenses

The council may also request bank statements to verify the income and expense figures you've declared.

If your self-employment income fluctuates, provide the income and expense records the council requests. The scheme calculates net self-employment income after allowable business expenses, tax, and NI, and applies the MIF.

The £25 Disregard in Practice

The £25 weekly earnings disregard works the same for self-employed and employed applicants. It's deducted from your assessed net earnings (or the MIF amount, whichever the council uses) before band placement.

Example: if £180 per week is the figure used after applying any MIF and deducting business expenses, tax, and NI, the council subtracts the £25 disregard, assessing you at £155 per week — placing you in Band 3 (£125.01–£200.00) for a 50% discount.

If you have a partner who is also employed or self-employed, the £25 disregard covers both of your earnings combined, not £25 each.

Protecting Your Application

The key to a smooth self-employment CTR application is thorough documentation. Keep records of income and allowable expenses; the council uses these to calculate your net self-employment income, subject to the minimum income floor.

Keep your business records clean, file your tax returns on time, and have your accounts ready before starting the application.

The County Durham Council Tax Reduction guide includes a self-employment income worksheet designed for Durham's income-banded scheme, helping you calculate your assessed weekly income before the council does.

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