UK Government Announces Reforms to Council Tax Debt Collection in England

The UK government has announced reforms to England's council tax system, aimed at reducing the impact of debt collection on households. com and the Money and Mental Health Policy Institute. The reforms address current practices where missing a single payment can lead to demands for the full annual bill shortly after.

Extended

Payment Windows and Repayment Plans Under the existing system, households receive a reminder 14 days after a missed payment, followed by a possible demand for the full year's bill seven days later.

The new rules will extend this period to 63 days, providing more time for households to address missed payments. Local authorities will also be required to collaborate with residents on sustainable repayment plans instead of rapid escalation to enforcement. Administrative fees for liability orders will be capped at £100 starting in April 2027.

Currently, these fees vary by council and can reach up to £153. Liability orders enable councils to pursue recovery actions, such as involving enforcement agents.

Updates to Discounts and Billing

The discount previously known as Severe Mental Impairment will be renamed Significant Cognitive Impairment from April 2027, aligning with terminology used in Wales.

This discount can reduce a household's bill by at least 25 percent and, in some cases, eliminate it entirely for eligible conditions including dementia, Alzheimer's disease, profound learning disabilities, and severe brain injuries. Billing will shift from a default of 10 monthly installments to 12, though households may opt for fewer.

GB News reported that research from the Money and Mental Health Policy Institute indicates council tax debt disproportionately affects individuals with mental health conditions, with one in ten behind on payments compared to four percent of those without such conditions.

Debt

Statistics and Context Council tax debt has increased in recent years.

7 million debts were referred to bailiffs in the 2024-25 period, marking a 13 percent rise from the previous year. 4 million people are currently behind on council tax payments.

“Council Tax debt collection is so aggressive it'd make banks blush.”

Martin Lewis stated that the announcement represents a significant initial step toward improvement, though he noted disappointment over the lack of updates on reforming the six-month rule for challenging council tax bands, which remains under consideration.