Wrong side of the tax: Hidden financial hardship of those in council tax arrears revealed

New research from Citizens Advice finds that many people in council tax arrears can’t afford to pay their debts, and have an average of just £7 left at the end of the month after covering their living costs. Some four in 10 have no money left at all.

The overwhelming majority - nine in 10 of the people who seek help from Citizens Advice with council tax debt - also owe money on other household bills, most commonly water and energy costs.

Yet outdated government regulations are forcing these people into sometimes desperate hardship. They push councils to use the courts to recover council tax debts which can add legal costs and bailiff fees to the debt. 

The charity says the rules also mean people become liable for the full annual bill two weeks after a missed payment. This means that missing an average council tax payment of £167 in the first month of the financial year can escalate to a debt of over £2,000 in just nine weeks. This is almost 300 times the monthly amount available to the average person seeking support from Citizens Advice on council tax arrears.

The system is also failing local councils. A 2019 Freedom of Information request revealed that, for every £1 of debt referred to bailiffs by councils, only 27p is ever returned to them.

Last year, the charity helped more than 83,000 people in England with council tax problems, over 40%  more than the next biggest debt issue.

Marcia, who sought help from Citizens Advice on council tax arrears, had to stop work owing to poor health and began applying for benefits. While she was waiting for a decision, she got behind on rent, council tax and energy bills. She made one payment to the council to cover both old and new arrears, but after a few months was told that she wasn't paying anything towards the old debt, so a bailiff would now collect. 

“I have had the bailiffs round which is scary as I just do not have the money to pay them. They are asking me to repay so much that, if I do pay it, I won't have enough money to pay towards my gas and electric debt or have food.

“It's really stressful as I just do not know how I can afford to repay all these debts when I am expected to pay out more than I have coming in.”

Dame Gillian Guy, Chief Executive of Citizens Advice, said:

“Government regulations push local authorities to use harsh collection processes. They pile rapidly-escalating debts on people who barely have enough money to get by. 

“Many people who need our help with council tax arrears have no more than a few pounds spare every month to repay their debts. An unexpected bill for thousands of pounds, accompanied by legal threats and bailiff action, is terrifying for the person concerned and ineffective for the council trying to recover the debt.

”To protect people from further harm, the government must change the rules to give councils the flexibility to collect council tax fairly and compassionately.”

Responding to the report, Cllr Richard Watts, Chair of the Local Government Association’s Resources Board, said:

“Councils have a duty to their residents to collect taxes so important services, like caring for older and disabled people, protecting children, fixing roads and collecting bins are not affected. They strive to recover unpaid tax as sympathetically as possible and to provide support to households at risk of financial exclusion or hardship.  

“As the Citizens Advice’s report makes clear, this needs to be supported by better guidance and funding. Councils would be in favour of it being made easier for them to recover money without having to use bailiffs, and would support the removal of the requirement for the entire annual sum to become payable if an instalment is missed. 

“Bailiffs should only ever be used as a last resort by councils. Before it gets to that stage, people will have been encouraged to apply for financial support by their council. Anyone having trouble paying their council bills should get in touch with their local authority for financial help and advice as soon as possible.”

Notes to editors

1. The full report, Wrong Side of the Tax is available here.
2. Data on the amount of monthly money left over to people who seek support from Citizens can be found in Negative Budgets: A new perspective on poverty and household finances (Citizens Advice, Feb 2020). It analyses data gathered by Citizens Advice debt advisors using a tool called the Standard Financial Statement (SFS). The SFS is agreed between debt advice and financial service providers. It enables advisers to build a detailed budget, recording levels and types of income, fixed costs such as rent, and flexible costs such as food.
3. Data on the increases in debt, and on rates of recovery of council tax debts through bailiffs can be found in Citizens Advice Freedom of Information request to local authorities published in November 2019.
4. Citizens Advice includes the national charity; the network of independent local Citizens Advice charities across England and Wales; the Citizens Advice consumer service; and the Witness Service.
5. Citizens Advice is the statutory consumer advocate for energy and post. We provide supplier performance information to consumers and policy analysis to decision makers.
6. The Citizens Advice Witness Service provides free, independent support for prosecution and defence witnesses in every criminal court in England and Wales.
7. Citizens Advice offers Pension Wise services at 500 locations in England and Wales.
8. Citizens Advice’s services are free, independent, confidential and impartial, and available to all regardless of race, gender, disability, sexual orientation, religion, age or nationality.
9. To get advice online or find your local Citizens Advice, visit citizensadvice.org.uk
10. For consumer advice, call the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 to talk in Welsh.
11. We helped 2.6 million people face to face, by phone, email and webchat in 2017-18. For service statistics see our monthly publication Advice trends.
12. Citizens Advice staff are supported by over 23,000 trained volunteers, working at over 2,500 locations in England and Wales.