A fair and effective system of local taxation underpins good public services and maintains trust between local taxpayers and elected councils. Council tax plays a vital role in funding the services that communities rely on every day and is paid by approximately 25 million households in England.
After 14 years of cuts and mismanagement, this Government have taken decisive action to stabilise councils’ finances, increasing investment by more than £5.6 billion over the next three years and providing the first multi-year settlement in a decade. As well as boosting funding, we have reformed how money is distributed around the country, reconnecting funding to need and deprivation—ending the unfair, irrational system that kept deprived places poor. We have taken the hard decisions dodged by previous Governments. But we know there is more to do.
Last year, the Government launched a consultation on proposals to improve and modernise the administration of council tax. Council tax plays a vital role, funding over 800 vital public services on which communities rely. It is therefore right that taxpayers expect a system that is clear, accessible and simple to navigate that supports people to pay what is due and helps them access support when it is needed. However, the system we inherited, introduced in 1993, has been largely unchanged over the last three decades. Over time, this has left parts of the system outdated, to the detriment of taxpayers and councils alike.
Councils must have reasonable powers to recover unpaid council tax and tackle avoidance. However, at its worst, the current arrangements can operate as one of the harshest enforcement regimes in the country, treating those who are unable to pay in the same way as those who wilfully choose not to. Missing payments can lead to immediate demands for large lump sum payments, liability orders, and the use of bailiffs.
Those in debt are often among the most vulnerable in society, including people on low incomes, those experiencing ill health, or households facing sudden financial shocks. Rapid escalation to aggressive enforcement action on council tax can push people deeper into hardship, compounding debt rather than resolving it. Under this Government, it will end.
Enforcement must be proportionate and treat people fairly and with dignity, particularly at a time when they are grappling with significant cost of living pressures. At the same time, the system must be fair and clamp down on deliberate tax avoidance.
This is why we consulted on a range of proposals and sought evidence on options to make the administration of council tax fairer for both taxpayers and councils. The consultation received over 3,000 responses from the public, local government and interest groups. I am grateful to all who took the time to share their views. I would also like to use this opportunity to put on record my gratitude to Martin Lewis and Money Saving Expert, and Martin’s charity, Money and Mental Health, for their tireless campaigning on these issues. Their work has been instrumental in shining a light on the real-world impact of council tax debt and the harm that poor administration and aggressive enforcement can cause, informed by the experiences of people who turn to them for help.
Through this consultation we have heard clearly that the current council tax administration system is not keeping pace with the realities faced by households and councils across the country. Consultation responses showed strong support for our proposals that will make day-to-day interactions with the system easier, reduce unnecessary escalation and provide better protection for the most vulnerable households in England.
Today, the Government are publishing their response to the consultation, setting out a wide programme of reforms to be delivered over the course of this Parliament. These represent significant reforms to the council tax system and will make a tangible difference for many of the most vulnerable households in England by making bills easier to manage, making support easier to access, and ensuring enforcement activity is fair and proportionate.
We will make it easier for households to manage their bills by making sure those who want to spread payments over 12 months can do so automatically, while those wishing to pay over 10 months can continue to do so. This will help households spread payments across the year and avoid sharp financial pressures at particular points in the year while maintaining flexibility for taxpayers to decide on the arrangement that suits them best. Councils will also be required to present clearer and more consistent information on the support available both on bills and on council websites, so that people can more easily understand their entitlements and options for support and seek help at an earlier stage.
We are also taking action to make collection and enforcement fairer. Our reforms will introduce additional safeguards for vulnerable households by extending the period before liability for the annual bill is triggered after a missed payment, requiring councils to take further steps to work with taxpayers during this period, and capping liability order costs at £100. Together, these changes will slow the escalation of enforcement, reduce stress and anxiety for households struggling to pay their debts, and give people more time to engage with their council and agree sustainable repayment plans.
We have heard many accounts of vulnerable taxpayers facing aggressive enforcement action, including by bailiffs. The Government support the work the Enforcement Conduct Board is doing to raise standards in the enforcement industry and ensure in particular that vulnerable people are treated fairly. The Ministry of Justice has consulted on introducing independent statutory regulation of the enforcement—bailiff—sector to build on the Enforcement Conduct Board’s excellent work. They will announce next steps in due course.
The consultation set out our proposal for a long overdue update to the title of the “severely mentally impaired” council tax disregard and to tackle barriers to access for those eligible. We will take forward our proposal to amend the name and definition to modernise this disregard and remove the stigma associated with the previous name that can deter people from claiming support to which they are entitled when parliamentary time allows. We will also take forward proposals to tackle wider barriers to access, including through a universal application form to reduce complexity and make the process clearer and more consistent for applicants and their families.
The consultation also sought views on the wider taxpayer experiences, including the effectiveness of the carers and apprentice disregards and the scope for additional support. These options carry cost implications which the Government will consider ahead of a future spending review.
This package will help protect the most vulnerable taxpayers in England, support households through ongoing cost of living pressures, and restore a greater sense of fairness and compassion in the council tax system. By making support easier to access, bills easier to manage, and ensuring fairness and empathy for those in council tax debt these reforms represent a significant step towards a system that treats people fairly, recognises genuine hardship and still ensures that council tax is properly collected to fund the delivery of services that communities rely on.
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