Up to 100,000 of the most vulnerable people in society are missing out on a council tax discount worth hundreds or thousands of pounds.

Little is known about it, and some councils are giving out misinformation. It's time to change that.

If you have, or know someone living with dementia, Alzheimer's, multiple sclerosis, Parkinson's or other similar conditions, it's important you take five minutes to read about the severely mentally impaired (SMI) council tax discount.

This discount typically saves people £400 a year.

Like students, those who qualify for the SMI discount are disregarded for council tax purpose.

That means those living alone don't pay any council tax at all, while those living with another – often their carer – qualify for a 25% reduction.

In some cases, it's also possible to get the discount backdated. It's up to individual councils whether they allow this – so it's a postcode lottery.

Personally, due to the range of misinformation that's given out on this (as I'll run through below), I think the rules need changing so that all councils backdate it.

Who's eligible?

For someone to qualify for a SMI council tax discount, both of the following must apply:

1. They must be medically certified as having a severe mental impairment. This is not specific to any particular medical condition – it is officially defined as someone who has 'a severe impairment of intelligence and social functioning (however caused) which appears to be permanent'.

So it's not a question of someone having dementia or Parkinson's automatically qualifying. Some will, some won't. It's up to a GP to decide and they will have to sign the form (which they should not charge you to do).

2. They must be eligible for one of a range of benefits. These include: incapacity benefit, disability living allowance, personal independence payments, severe disablement allowance, income support, constant attendance allowance, disability working allowance, some forms of universal credit and others.

Just to be clear, some councils wrongly tell people they need to be receiving these benefits.

That's not correct – the law simply says you need to be eligible for them – and this may well act as a prompt to claim them too.

Be prepared before you apply

It is quite likely the person who has the SMI will not be able to claim themselves, in which case their carer can do it for them.

You'll need to fill out a claim form from your council to register for the discount. Find contact details at www.gov.uk/apply-council-tax-reductionI've been campaigning to raise awareness on this since 2016. There have been successes, with some reclaiming thousands of pounds, yet many people struggling to claim.

This mixed feedback prompted the team at my site www.moneysavingexpert.com to launch an investigation, consisting of freedom of information (FOI) act requests to all councils in England, Scotland and Wales, and a mystery shopper exercise of 100 councils.

The FOI results from 265 councils showed a staggering difference in those claiming the discount. Uptake in Renfrewshire is 77 times higher than just 40 miles away in East Ayrshire – which is unlikely to be accounted for by differences in the population make-up alone.

In the mystery shopping exercise nearly 70% of councils gave out some form of misinformation; from not knowing the eligibility criteria, down to five call handlers being unaware of the existence of the SMI discount at all.

So if you are calling up to arrange it, make sure you understand it yourself. If they give you the wrong information be polite but firm.

If you're struggling with this, more help and guidance is available through charities including www.citizensadvice.org.uk, www.dementiauk.org, www.carersuk.org or www.alzheimers.org.uk.

Martin Lewis is the founder and chair of MoneySavingExpert.com