Tens of thousands of people who are living or lived with someone with a 'severe mental impairment' may be able to reclaim council tax, MoneySavingExpert.com can reveal, after three charities warned many overpay. One MoneySaver told us her mum was refunded £3,000 after overpaying for seven years – here's how to claim.

Someone who has been medically certified as having a permanent condition that affects their intelligence and social functioning (eg, Alzheimer's or Parkinson's) is 'disregarded for council tax purposes' in England, Scotland and Wales – in a similar way that students are, for example.

Normally if there's only one person living in a home, you get a 25% council tax discount. But if you live with someone with a severe mental impairment and no other adults – or only adults who are disregarded for council tax purposes – you can also claim 25% off. You can often reclaim retrospectively too.

Anyone with a severe mental impairment who's living alone shouldn't be paying any council tax at all.

Who's eligible to be disregarded for council tax purposes?

There are a number of reasons why someone could be disregarded for council tax – see the full list below. If someone's severely mentally impaired, they'll be disregarded if both of the following apply:

  1. They've been medically certified as being severely mentally impaired. For example, if they have dementia, Parkinson's, severe learning difficulties or have had a stroke.

  2. They're eligible for at least one of the following benefits: (these aren't all means-tested, and they don't actually need to claim any benefits to get the discount)

    - Attendance allowance under Sec 64 of the Social Security Contributions & Benefits Act
    - Severe disablement allowance
    - The highest or middle rate of the care component of a disability living allowance
    - The daily living component of personal independence payment
    - An increase in the rate of your disablement pension
    - Disabled persons tax credit
    - Incapacity benefit
    - Employment and support allowance
    - Unemployability allowance or supplement
    - Constant attendance allowance or income support including a disability premium

It's impossible to put an exact figure on the number of people who live with someone who's severely mentally impaired and overpay council tax, but three major charities – the Alzheimer's Society, Parkinson's UK and the Stroke Association – have told us awareness of the tax saving is extremely low among those affected and their loved ones.

If you're among those who've been missing out on the saving, not only can you make sure you benefit from the 25% discount in future, you may also be able to reclaim retrospectively.

The process for issuing a retrospective payment differs from council to council (so check with your local authority to be sure), but in some cases you may be able to claim back cash you've overpaid at any point since 1993.

How do I claim for a reduction or reclaim if I've overpaid in the past?

The process for making a claim varies by area, so you'll need to check your local authority's procedure, but here are the basics. Either you or the person with a severe mental impairment can make the claim.

  • You'll need a doctor's diagnosis. A registered medical practitioner must have diagnosed a condition causing severe mental impairment. In some cases you'll need to attach a written diagnosis to your claim – in others you just give your doctor's details and they'll be contacted for confirmation.
  • Get a claim form to apply for a reduction going forward. You'll need to contact your local authority for a claim form to register for a council tax discount (find contact details via the Government's 'Apply for Council Tax Reduction' service). Fill this in – you may be asked to attach some supporting evidence, such as the doctor's diagnosis or evidence of receipt of relevant benefits.
  • If the person with a mental impairment doesn't claim a benefit, you may need a letter from the Department for Work and Pensions (DWP). If the person you're living with qualifies for a benefit but for whatever reason doesn't claim it (they should), then in some cases councils will ask you to get a letter of confirmation from the DWP saying you're eligible.
  • Apply for a backdated discount separately. If you're making a retrospective claim, you'll need to write to your local authority explaining the circumstances – you'll need to do this separately even if you're claiming for a reduction going forward as well, though you can attach your letter to the claim form.

    You don't need to explain why you didn't apply for a reduction earlier, but you will need to prove the criteria for a discount applied at the relevant time in the past.
  • If you live with someone with a mental impairment who's since died, you can still claim. The process is the same – you should be able to claw back overpayments for the period when the person with the impairment lived with you. You'll still need proof of the person's condition though, such as a doctor's letter.
  • In Northern Ireland it works differently. There's a rates system instead of council tax, meaning that every property is valued individually. The only roughly similar discount is the disabled person's allowance, which gives a 25% discount on rates for homes where a disabled person lives and the property has been adapted to suit their needs. See full info on the NIdirect website.

'My mum got over £3,000 back'

Kay, the daughter of a couple who had been paying 100% council tax unnecessarily for seven years, told us her mum was subsequently refunded more than £3,000 by Cheshire East Council after the death of her husband who had been living with dementia.

Kay told us: "I recently learnt that a person with diminished mental capacity is no longer required to pay council tax and on that basis applied to my local authority to reclaim overpaid tax on behalf of my late father.

"At the time when my parents became eligible for the reduction, my mum was just getting used to managing their affairs on her own. I'm not sure exactly who should have brought it to their attention but I like to think that we're relatively switched on about matters like this – I can't help but feel that if we didn't know about the discount, there may be lots of people in the same situation."

It wasn't until Kay's friend's parents were advised to apply for a council tax reduction that she realised her own mum might be entitled to a refund for overpayments. After doing some research, Kay filled out a claim form and their GP then completed a form to support the claim from details retained in her dad's medical notes.

Kay sent off these documents to Cheshire East Council and within 10 days a lump sum for more than £3,000 was repaid into her mum's bank account, which represented overpayments made between 2007 and 2014, when her dad passed away.

How many people are missing out on the discount?

The Alzheimer's Society, Stroke Association, and Parkinson's UK – which has produced a dedicated booklet on the topic – all told us they believe a large number of people living with someone with a severe mental impairment are failing to claim the council tax discount.

The Department for Communities and Local Government and the Local Government Association say there are no official figures – however, based on the best available estimates of the number of people affected, it appears 10,000s or even 100,000s could be eligible to reclaim.

The Alzheimer's Society says there were 850,000 people with dementia in the UK last year, while there are about 127,000 people with Parkinson's and more than 1.2 million stroke survivors – and while it's not known how many of these people are eligible for a council tax reduction, many with other conditions will be as well.

By contrast, as of September last year, just 205,084 households were registered as qualifying for a 25% council tax discount – and that figure includes ALL categories of disregarded people (such as student nurses and apprentices – see the full list below), not just those with a severe mental impairment.

'Mum was living with someone with dementia so she got £3,000 council tax back.' Can you reclaim?
It's possible to reclaim council tax retrospectively if you've overpaid at any point since 1993

What do the charities say?

The Alzheimer's Society told us that the information provided by local authorities is often hard to find and that many local authorities "hide the information on council tax exemptions and reductions on their websites".

It added that some sites have information about other types of tax exemptions but ignore this one completely. It also told us it's encountered local authorities where staff are poorly informed or trained and confuse eligibility for this with eligibility for another benefit that is actually means-tested.

Martina Kane, senior policy officer at the Alzheimer's Society, says: "Awareness is generally very low – it's really important it improves and those with dementia who can benefit from this vital financial support, do."

A spokesperson for Parkinson's UK told us: "Awareness of the council tax reduction is low – only 1,000 people have downloaded our booklet on this and we get very few enquiries on this through to our helpline."

Esmée Russell, head of policy and influencing at the Stroke Association, told us: "Very few stroke survivors, or their families, will be aware that they may be exempt from paying council tax by virtue of their disability. Stroke happens in an instant – over half of stroke survivors have a disability and this can quickly impact on people's income and expenses."

Who else qualifies for a council tax reduction?

Claiming a 25% council tax discount isn't only restricted to those living with someone with a severe mental impairment. If you're the only other adult living with someone who falls into any of the following categories of people who are disregarded for council tax purposes, you should be able to claim:

  • Persons in detention
  • Persons in respect of whom child benefit is payable
  • Apprentices
  • Foreign language assistants
  • Students on full-time courses
  • Students under the age of 20 undertaking qualifying courses
  • Student nurses
  • Youth training trainees
  • Patients where hospital is their main residence
  • Patients in homes
  • Care workers
  • Residents of hostels, night shelters etc
  • Members of international headquarters and defence organisations
  • Members of religious communities
  • School and college leavers
  • Persons with a relevant association with visiting armed forces
  • Foreign spouses of students

If you think you qualify for a discount because you live with someone in any of these categories, you should contact your council as above. You may also be able to reclaim for previous years, though the evidence you'll need and the process among different councils may vary.

Your success stories...

Since this article was published we've heard from a number of MoneySavers who've already been successful in applying for a 25% severe mental impairment council tax discount...

Denise said: "My husband has a rare degenerative neurological disease and so I contacted my council [for a council tax reduction]. Altogether I've saved £1,154, which works out at £731 as a refund plus nothing to pay on council tax for the rest of year. I have been shouting MSE's praises very loudly - one of the most useful sites ever.

"I am now going to try and get some money refunded from the council , where we used to live. I can't see why they wouldn't be able to do this. Thank you so much for writing about this discount, which is not widely known about. I care solely for my husband and to find any help at all feels wonderful."

Myra said: "Just read your article on council tax reduction for those with mental impairment - knew nothing about this. Have just contacted my local council for my mother who cares for my dad and had a stroke in 2007, diagnosed with dementia since 2010 and has Parkinson's. They have said yes I can claim and are sending all the forms out today - will let you know what we get back."

Diane said: "Thanks so much for your article on council tax exemptions, it's great to hear about the support available for people with dementia."

If you're successful in applying for a council tax reduction or have managed to reclaim previous overpayments, let us know by emailing smi@moneysavingexpert.com.

This article was updated on 31 Jan 2016 to clarify that councils have different policies on retrospective reclaims. If you're unsure whether you can claim for a past payment, contact your council to check.