After 33 years of punishment over common sense, Britain’s council tax debt trap is finally being forced to change
If you had to guess which industry has the most aggressive debt collection practices, what would you say?
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Maybe you would go for banks, energy companies, or telecoms firms. But the reality is that your local council is likely to be the worst culprit.
Currently, if you miss just one council tax payment in England, within three weeks your council can demand that you pay your full annual bill.
That can be up to 12 times more than the original debt, and on average in England amounts to £1,868 this year.
This is not only punitive, it defies common sense. If someone cannot pay a monthly instalment, they are not going to be able to find twelve times that amount in just three weeks. Research by my charity, Money and Mental Health, shows that 91% of people behind on council tax bills could not afford an unexpected expense over £1,000.
Then, to make matters worse, when someone cannot pay their full annual bill, many councils add extra charges for sending a legal letter that allows them to take much more aggressive forms of debt collection action, like sending in bailiffs. There is no cap on what can be charged for receiving this letter, and for some people this has been as high as £155.
This rapid and aggressive process could hardly be better designed to cause misery, and millions are affected. Our research shows that 3.3 million people were in council tax arrears in 2023, and this is unlikely to have improved in the years since.
It also disproportionately affects those of us with mental health problems, who are more than twice as likely to have missed a council tax payment. Shockingly, nearly three quarters of those in council tax arrears who were referred to a bailiff have experienced a mental health problem.
One person who took part in our research described coming home from hospital after a mental health crisis to a court summons and a bill of £1,000, having missed a payment while seriously unwell.
Another person told us that they received a letter on Christmas Eve, which had arrived late due to postal delays, saying they needed to pay their council tax bill by Christmas Day, despite having already contacted their council to explain they were struggling to make their monthly payments.
That is why we have been campaigning hard with our Chair and Founder, Martin Lewis, to change this system, and we are delighted that the government listened. This week it agreed to make important changes to regulations which are 33 years old.
From April 2027, people will be given two months between missing a payment and having to pay their full bill. In addition, the extra charges that councils add for sending a legal letter will be capped at £100.
These changes are a significant step forward. They will give vital breathing space to help people get on top of their finances, and reduce the unnecessary distress that too many people currently go through.
The changes are not perfect. Ideally, people would not become liable for their full annual bill after missing one payment, and the extra charges would be capped at a lower rate. We also want to see councils take more steps to signpost people to money advice and to help them get back on their feet before escalating debt collection.
But this week’s announcement is still a major improvement on the current system, and will make a real difference to those at the sharp end of the cost of living crisis.
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Helen Undy is Chief Executive of the Money and Mental Health Policy Institute
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