Council Tax Attachment of Earnings Orders (AEOs) - Questions and answer
What is a Council Tax Attachment of Earnings Order?
Where there is non-payment of Council Tax, the local authority can apply to a magistrate's court for a Liability Order against the defaulter. If a Court grants a Liability Order, an authority has some options for recovering the outstanding amount. One of these is an Attachment of Earnings Order. The order itself is in a form prescribed in regulations. It contains the name of the debtor, his payroll number (if known) and the local authority reference. It confirms that the named person is liable to a Council Tax AEO and specifies the amount of charge that is still owed. Deductions in line with the order should be made as soon as possible after the order has been received.
What duties does this order place on an employer?
This order is a legal document and places certain duties on an employer, so it is important that you know the governing principles. Details of your statutory duties are set out at paragraph 13 below.
If the person who is the subject of the order is in your employment, you should make deductions from their earnings. These deductions should begin as soon as possible after the receipt of the order. The amount deducted should then be forwarded to the authority by the 18th day of the month following the month in which the deduction was made.
As well as the amount to be paid to the authority, you may also deduct £1 per transaction from your employee towards your administrative costs. You should provide your employee with a written statement showing the total amount deducted, including your administrative costs. This can be done when a pay statement is issued but, if this is not convenient, may be done as soon as possible after the deduction is made.
If the employee has moved on or has never been in your employment, you should inform the issuing authority within 14 days and your liability to do anything under the order will cease.
How long does this order last?
Deductions should be made each pay day until:
- the total amount specified on the order has been paid over to the authority; or,
- until the person has left your employment; or,
- until the order is discharged by the authority
When the employee leaves your employment and you have notified the local authority, nothing further is required of you. The local authority will have to serve a copy of the order on the new employer that will state the amount remaining to be deducted.
How much should be deducted?
The amount to be deducted is dependent on the total net earnings received by the employee. For the purposes of these orders, net earnings means - earnings after the deduction of income tax, primary Class 1 national insurance contributions, superannuation contributions and any deduction with a higher priority. The regulations include a full statutory definition of 'earnings' in regulation 32 and also includes tables which specify the percentage to be deducted according to the amount of net earnings and the frequency of pay period. If an employee receives holiday pay, deductions should be made as detailed below.
What are earnings?
Earnings are defined as sums payable by way of wages or salary, including:
- any fees
- bonus
- commission
- overtime pay
- other emoluments payable in addition to wages or salary payable under a contract of service; or,
- statutory sick pay
Earnings do not include sums payable by public departments of the Government of Northern Ireland or of a territory outside the United Kingdom;
- pay and allowances of members of the armed forces;
- benefit or allowances payable under any enactment relating to social security. This includes maternity pay;
- allowances payable in respect of disablement or disability, and
- wages payable to a person as a seaman, other than as a seaman of a fishing boat.
- Working Families Tax Credit.
What are net earnings?
Net earnings are defined in regulation 32 as the amount payable after deduction of:
- income tax
- national insurance
- superannuation payments; and,
- any deduction with a higher priority
Are youth training allowances earnings?
No
What do I deduct if there is an advance for holiday pay?
The amount to deduct is the aggregate of:
Example: An employee receives £1000 on the pay day. This comprises of £300 for the week in which the pay day falls and overtime of £100; and £600 for 2 weeks' holiday advance, i.e. two weeks of standard pay at £300 per week. The amount to be deducted is: (17% of £400 = £68.00) + (12% of £300 X 2 = £72.00) = £140.00.
- the amount that would have been deducted on the pay day if there had been no advance of pay, and
- the amounts that would have been deducted if the amount advanced had been paid on the normal pay days or days.
How should I deal with loans made for other purposes?
Loans made, for example, for the purchase of a season ticket or for helping with moving to a new house, are not advances of pay and should not be counted as earnings.
The way that repayments of such loans are treated in calculating a deduction depends on the date that the CTAEO was made:
for calculating a deduction under a CTAEO made before 1 April 1995, net earnings should be reduced by the amount of the repayment made to the employer, and
After 1 April 1995, the AEO deduction should be based on net before any loan repayment. before any loan repayment.
Other weekly intervals - If the person is paid at intervals of a whole number of weeks, then the net earnings should be divided by the number of weeks in the pay period. Table A should then be used to work out the appropriate weekly deduction and the resulting amount multiplied by the number of weeks in the period.
More than one month - If a person is paid at intervals of a whole number of months, the net earnings should be divided by the number of months in the pay period. Table B should then be used to work out the appropriate monthly deduction and the resulting amount multiplied by the number of months in the period.
Regular intervals - not whole weeks or months - If a person is paid at regular intervals, but not at intervals of a whole number of weeks or months, then net earnings should be divided by the number of days. Table C should then be used to work out the appropriate daily rate, which should then be multiplied by the number of days in the period.
Two or more series of payments at regular intervals - If the person is paid in two or more series and payments are made in regular intervals, then select the series with the shortest interval between payments and use the tables as described above. In addition, deduct 20% of the net earnings payable in every other series. If the person is paid in two or more series and all the intervals are the same length, then select one of these, make deductions as described above and, in addition, deduct 20% of the net earnings payable in every other series:
Example: An employee's net pay is £150 weekly and £600 monthly
A deduction of £7.50 is made for the weekly pay and £120 for the monthly pay (i.e. 20% of £600).
Irregular intervals - If the person is paid at irregular intervals, the net earnings should be divided by the number of days since the last payment and Table C should be used to work out the appropriate daily deductions, which in turn, should be multiplied by the number of days in the period:
Example: An employee's net pay:
The deductions to be made would be:
Regular and irregular intervals - If on the same pay day, the person is to be paid regular period earnings and irregular period earnings, these amounts should be added together and treated as earnings payable at the regular interval, the appropriate table being used:
Example: An employee receives £250 as normal net weekly pay. In addition, £350 is received every 15 days for a different task. The deductions to be made would be for weekly £600. The deduction rate for £600 is 17% of the first £505 plus 50% of the remainder, i.e. £85.85 + £47.50 = £133.35.
- £180 (from 1 April to 9 April - 9 days)
- £240 (from 10 April to 19 April - 10 days)
- £330 (from 20 April to 30 April - 11 days)
- 180/9 = £20 - Daily deduction = £20 X 3%, (i.e. £0.60). Deduction to be made for period: 9 X £0.60 = £5.40.
- 240/10 = £24 - Daily deduction = £24 X 5% (i.e. £1.20). Deduction to be made for period: 10 X £1.20 = £12.00.
- 330/11 = £30 - Daily deduction = £30 X 7% (i.e. £2.10). Deduction to be made for period: 11 X £2.10 = £23.10).
Schedule 4 - Deductions to be made under Attachment of Earnings Order
Table A - Deductions from weekly earnings
| (1) Net earnings | (2) Deduction rate % |
|---|---|
| Not exceeding £75 | 0 |
| Exceeding £75 but not exceeding £135 | 3 |
| Exceeding £135 but not exceeding £185 | 5 |
| Exceeding £185 but not exceeding £225 | 7 |
| Exceeding £225 but not exceeding £355 | 12 |
| Exceeding £355 but not exceeding £505 | 17 |
| Exceeding £505 | 17 in respect of the first £505 and 50 in respect of the remainder |
Table B - Deductions from monthly earnings
| (1) Net earnings | (2) Deduction rate % |
|---|---|
| Not Exceeding £300 | 0 |
| Exceeding £300 but not exceeding £550 | 3 |
| Exceeding £550 but not exceeding £740 | 5 |
| Exceeding £740 but not exceeding £900 | 7 |
| Exceeding £900 but not exceeding £1420 | 12 |
| Exceeding £1420 but not exceeding £2020 | 17 |
| Exceeding £2020 | 17 in respect of the first £2020 and 50 in respect of the remainder |
Table C - Deductions based on daily earnings
| (1) Net earnings | (2) Deduction rate % |
|---|---|
| Not exceeding £11 | 0 |
| Exceeding £11 but not exceeding £20 | 3 |
| Exceeding £20 but not exceeding £27 | 5 |
| Exceeding £27 but not exceeding £33 | 7 |
| Exceeding £33 but not exceeding £52 | 12 |
| Exceeding £52 but not exceeding £72 | 17 |
| Exceeding £72 | 17 in respect of the first £72 and 50 in respect of the remainder |