Council tax arrears at £4.9bn as charity calls for “urgent changes” to the rules

  • Latest figures show £4.9bn is owed to local councils in England
  • Council tax arrears has increased by £521m (12%) in the last year
  • Changes needed to council tax collection to protect struggling households

The Money Advice Trust, the charity that runs National Debtline and Business Debtline, has responded to the latest figures that show £4.9 billion in council tax is now owed by households in England, by urging central government to make changes to the way local authorities are able to collect council tax debt.

The figures from the Department for Levelling Up, Communities and Local Government show that arrears have increased by £521 million (12 percent) in the last year alone (to March 2022).  With inflation now at 9.1 percent and millions of households continuing to struggle with rising costs across the board, the charity is calling for reforms to existing rules to help those who cannot pay.  This includes changing the current rule, which sees anyone who falls behind on council tax payments, becoming liable for their full annual bill. 

Council tax debt growing

Analysis from the Money Advice Trust shows that while the pandemic increased the challenge for many households in affording their council tax, council tax arrears have been growing at an increasing rate.  In the past five years, the average Band D council tax bill in England has risen by 24 percent (from £1,530 to £1,898).

However, over the same period the level of council tax arrears has risen by 74 percent – a significantly higher proportion.

In the last tax year (April 2021 – March 2022) the charity reports that one in four (24 percent) of callers to National Debtline and Business Debtline had council tax arrears.  The amount owed has also grown with callers to National Debtline owing on average, £1,578 – up by over £500 since 2018 (£1,005).

Changes needed to “outdated rules”

Current rules governing council tax collection were introduced 30 years ago and have not kept up with a changing context of more households struggling to afford their bills.  The charity is calling on government to take a twin-track approach, that they say will help the treatment of those who cannot pay and enable councils to recover greater amounts in the longer term, by:

Improving support through increased and ringfenced funding for local Council Tax Support schemes to prevent arrears occurring in the first place.

  • Reforming existing collection rules (The 1992 Council Tax (Administration and Enforcement) Regulations) including,
    • stopping people becoming liable for their full annual bill if they fall behind on instalments.
    • Introducing a pre-action protocol so councils have to offer genuinely affordable repayment plans before progressing to other collections methods.

Joanna Elson CBE, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said:

“Today’s figures reveal the sheer scale of council tax arrears and reflects the struggles many households are facing in affording bills.  Urgent changes are needed to the outdated rules that are currently adding to the pressure on already fragile finances.

“Councils play a crucial role in our communities providing much needed services and it is right that they are able to collect the money owed to them. However, this needs to be done in a fair and proportionate way – as things stand, the current rules make it harder to do this.

“We are calling on central government to reform 30-year-old collection rules to ensure those who are struggling to pay are treated fairly and to provide more flexibility for councils to agree affordable repayment plans, while also increasing support for Local Council Tax Support to stop people falling behind in the first place.

“I would encourage anyone worried about their finances to contact a free debt advice charity like National Debtline.”

National Debtline offers free debt advice at www.nationaldebtline.org.