Toby Murray, policy and campaigns manager at Debt Justice, said: “The vast majority of people aren’t avoiding council tax, they simply can’t afford it.
“People in council tax arrears are overwhelmingly on low incomes, and many are living in poverty. Rather than help, councils are sending in the bailiffs – punishing people for struggling with their bills.
“Councils should end the use of bailiffs for council tax debt collection and instead introduce urgent reforms, including a duty of care to protect people most at risk.”
Council tax is essential to fund local authorities, particularly as many are cash-strapped as they grapple with rising costs for homelessness and social care.
Bills have risen in recent years as inflation has spiked, while some struggling local authorities have been given special permission to hike rates by more than 10% to help fill financial black holes.
At a time when the cost of living crisis has seen people face rising energy bills, rents and other inflated costs, council tax arrears have surged by more than £600 million in England alone.
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A quarter of people who call National Debtline for advice have council tax debt, averaging £1,958 per person, making it one of the top three most common debts its advisers hear about.
Steve Vaid, chief executive at the Money Advice Trust, the charity that runs National Debtline, said: “Arrears levels of this magnitude underline the need for urgent action. “Every day at National Debtline, we see how council tax continues to be one of the most common debts people face, with the amount owed on average rising 46% (£617) compared to 2020.
“Councils have a vital role in helping residents with unmanageable bills and to ensure council tax – crucial to funding local services – is collected in a way that is fair and affordable.
“The government has rightly recognised the need for change, to better support people who have fallen into difficulty, and this is something we have long campaigned for. However, if the government is serious about tackling council tax debt, they will also need to invest in increased council tax support – to help stop people falling behind in the first place.”
Council tax is also expected to rise by 5% each year, the spending review revealed, to pay for local services.
A YouGov poll for debt charity StepChange found 41% of people earning under £35,000 are worried about meeting their council tax payments.
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More than one in three StepChange clients are in council tax arrears. Typical arrears among the charity’s clients rose 16% from 2023-24 to 2024-25 from £1,805 to £2,094.
Peter Tutton, director of policy, research and public affairs at StepChange, said: “These figures today are unsurprising and point to a broken system which is repeatedly pushing the most financially vulnerable groups into hardship, as councils scramble to fund essential services against an incredibly difficult financial backdrop.
“As it stands, existing practices around council tax debt collection only exacerbate financial difficulty and the reality is that the current system lacks compassion and clarity.”
How is Labour looking to change the council tax system?
Labour announced a consultation on council tax changes, which it claimed would “modernise the billing process to make it fairer, simpler and more supportive”.
Changes include moving to a 12-month billing by default rather than spreading payments over 10 months, meaning lower monthly payments for the average Band D household’s bill by £38 per month.
Ministers are also looking to bring in better protection for those falling behind on bills by capping the fees added to debt when going to court and changing when a household may become liable for a full-year’s bill.
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Labour also proposed plans to modernise support available, including updating the definition of the severe mentally impaired exemption, which Martin Lewis described as “horribly named, underclaimed, over-complex and under-publicised”.
Improvements to current disregards for care workers and apprentices will also be considered as well as boosting transparency on what support is available for people who are struggling to pay.
The government is also reviewing debt enforcement practices more widely including the conduct of bailiffs.
Jim McMahon, minister for local government and English devolution, said: “As part of our Plan for Change, we’re putting working people first.
“We are listening and taking action to make council tax fairer, more transparent and easier to manage. Under our plans, local government will be there to support, and not to punish, people who fall behind.”
MoneySavingExpert.com founder Martin Lewis and his charity, the Money and Mental Health Policy Institute, have been calling for change to how council tax debts are treated for years.
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Lewis said: “Council tax’s rapid and aggressive debt collection methods currently hurt millions and disproportionately affect those with mental health problems.
“Within three weeks of missing a monthly payment many councils say you must pay for the whole year. Ridiculous, how can people who can’t afford to pay for a month, suddenly pay for a year?
“After a further three weeks councils can call bailiffs in and rack up charges on charges. No commercial lender is allowed to behave like this, meaning constituents are treated worse than consumers. Worse, it’s counter-productive, can add to council’s costs and still doesn’t mean people can pay it back.
“The government has listened to our evidence, and this consultation thankfully looks at slowing it down, adding-in consideration, capping added costs, and pointing people towards help to pay.”
Some have called for the government to go further.
Fairer Share has been campaigning for the council tax mechanism to be scrapped all together and replaced with a proportional poverty tax.
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This would see council tax and stamp duty replaced with an annual levy of 0.48% of a property’s value, which the campaigners argue would generate more cash and predictability for councils while making bills fairer.
In response to the government’s proposals for reforms, Andrew Dixon, Fairer Share founder, said: “This announcement is an admission that the current council tax system is not fit for purpose.
“But rather than tinkering with allocations, the government should be replacing the entire framework with a modern, proportionate approach that taxes homes based on their actual market value.
“A proportional property tax would ease the cost of living for millions, reduce regional inequality, and provide sustainable funding for councils across the country.”
National Debtline provides free, independent, expert advice. Contact National Debtline for free on 0808 808 4000 or via www.nationaldebtline.org.
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