Thousands of households warned they could miss out on a £150 tax refund

Councils are advising anyone who needs the £150 rebate to pay their energy bills but is stuck in their overdraft to ask their bank to make the funds available.

Thousands of households are being warned they risk missing out on £150 council tax refund if they are overdrawn.

If you owe your bank, the money could end up being used to pay off your debt.

While it’s not a good idea to be constantly in your overdraft limit – ideally you should only use it for emergencies – the £150 rebate aims to help ease the pressure of mounting bills.

If the money is used to pay off your overdraft, it can’t be offset against your utility bill or other increased costs you’re facing.

Councils are advising anyone who needs the money to pay their energy bills to ask their bank to provide the funds.

Westminster Council has told its residents: “If you are overdrawn you can exercise your first right of appropriation to pay £150 so your bank does not use it to pay off your overdraft.”

A statement from Redbridge Council reads: “Households can exercise their first right of appropriation on the payment of £150 so your bank doesn’t use it to pay off any overdrafts.

“A sample letter that households may wish to use to exercise their right of appropriation is available on the National Debt website.”

Central Bedfordshire Council also says: “By telling your bank to only use it for a specific purpose, for example to pay your energy bills, your payment will not be applied to an outstanding overdraft.

“This protection is known as a ‘First Use Order’.”

Who is entitled to the £150 tax refund?

Council tax refunds are granted to homes in Council tax brackets A, B, C or D in England and Wales – around 80% of properties.

Those living in England in council tax bands E, F, G and H – or even I in Wales – may still be eligible for the payment if they are vulnerable or on low income as a new discretionary fund is set up.

Residents in Scotland are entitled to a £150 rebate if they’re in bands A to D – but they’ll also qualify if they’re currently also receiving council tax relief.

If you are eligible, the money does not have to be repaid and will be spent directly by the municipalities from April.

For those who pay by direct debit, the municipalities use the data they have in their system for you to transfer the money straight to your bank account.

If you don’t pay by direct debit, local authorities should prompt you to file a claim and ask for your account details so they can process the payment.

The Local Government Association (LGA) has urged households to watch out for scammers trying to steal your details and said councils will never ask for bank details over the phone.

Councils should write to you to ask for your details.