If you owe council tax, you are not alone. Council tax debts are now the most common type of debt that Citizens Advice sees and in 2016 a third of people contacting StepChange had council tax arrears. This is a priority debt because you can be sent to prison for not paying it. This is rare but it does happen.
Council tax arrears increase dramatically if you ignore them because local authorities are faster to go to court and send in bailiffs than other creditors and this adds a lot of extra costs.
Why are so many people affected?
The 2008 crash left many people with frozen benefits, frozen wages and reduced hours. These problems were made worse by the replacement of the old national Council Tax Benefit in 2013/4 by local Council Tax Support schemes. Under the new schemes, most councils started charging people on benefits some council tax for the first time. Many of these people have been unable to afford it and ended up in debt.
Collecting a few pounds a week from the poorest people it is a very badly designed tax. Apart from the unfairness, the review of these new Council Tax Support schemes, published in April 2016, points out it is expensive and inefficient to collect. But that doesn’t help you if you are struggling to pay it.
Are you paying too much council tax?
- Single people should get a 25% discount.
- The 25% discount also applies if the other adults in your house are exempt from council tax, for example they are students or have a severe mental disability such as Alzheimer’s, Parkinson’s, or mental problems after a stroke.
- If you are on benefits or a low income you may be entitled to Council Tax Support – apply on your council’s website.
- If you only get a few pounds of Pension Credit, you don’t have to pay any Council Tax. So if you are a pensioner with an income below £156 a week (£238 for a couple), check this Pension Credit calculator.
- You may be in the wrong council tax band. If your neighbours are in a lower band than you, read MoneySavingExpert’s guide on how to challenge your banding.
- If someone disabled requires additional space or facilities, your council tax may be reduced.
If you have council tax arrears
If you get behind on the monthly payments, phone your council and try to make an arrangement to pay. If you ignore the problem many local authorities are quick to go to court for a Liability Order which can add £100 or more to your debt straight away.
Councils are quick to pass on Liability Orders to the bailiffs – in 2014/5 more than a million council tax debts were sent to bailiffs for collection. Bailiffs fees make your debt even larger as the following example shows:
council tax arrears £95
cost of summons & liability order £120
First letter from bailiff £75
First visit from bailiff £235
The letter from the council may have said that you have to pay the whole of the rest of the current tax year immediately. Don’t let that put you off! Phone the council and offer monthly payments – it can help to get these accepted if you say you will set up a direct debit
If you can’t afford as much as the council is asking, good places to go for help are:
- your local Citizens Advice, especially if you are having problems with benefits claims and this is one of the reasons for the council tax arrears; or
- StepChange if you have other debts as well.
Liability orders and bailiffs
If you get a summons or a letter saying that a Liability Order has been granted, again phone the council and try to make an arrangement. If you are on JSA ESA or Income Support, you could ask for your council tax debt to be repaid by deduction from your benefits of £3.70 a week. If you can do this, the debt won’t be sent to the bailiffs.
When you make an arrangement to pay, try to pay the exact amount by the date agreed – a standing order or direct debit is the best way.
If the debt is sent to the bailiffs, read Bailiffs – what you need to know. That looks at whether you have to let them in (for council tax arrears the answer is NO!) and what to do about your car to stop that being taken. You may need help to negotiate with the bailiffs or to ask for the debt to be returned to your council – go to your local Citizens Advice.
Tip – check previous tax years
Councils work in tax years which run from April to March. If you get a letter saying that you owe £230 for the tax year 2014 and you may assume that is all you owe… but you may also have debts from previous tax years the letter doesn’t mention. This can be very confusing. So whenever you talk to the council, don’t just ask about the letter you have just had – also check if you have any debts from previous tax years as well.
Don’t borrow more!
StepChange have found that people who get a tough demand or threat from their council are more than three times as likely to take out a payday loan. It might feel as though this will solve your problem, but by getting deeper into debt and at high interest rates, this makes your situation worse. It’s better to get debt advice.
If you have other debts as well
If you don’t have enough money to pay all your debts, Council Tax should be one of your top priorities, even if this means paying less (or even nothing!) to your credit cards and loans.
Read about a Debt Management Plan and how it can help you deal with your non-priority debts if you can’t make the minimum payments. You may be worried about how your other creditors will react, but they will accept that you have to pay priority debts such council tax and mortgage or rent arrears first.
If you are looking at a Debt Relief Order (DRO) or bankruptcy – then council tax arrears for previous years and this year are included. But if you have a partner who is also named on the council tax bills, then they are ‘jointly liable’ with you, so the council will then chase them to pay.