Debt and insolvency solutions for council tax
Ways to deal with council tax debt including breathing space, debt relief orders, bankruptcy, and applying for discounts and reductions.
Breathing space moratoriums to delay enforcement
Council tax arrears are a qualifying debt for a breathing space or mental health crisis moratorium.
Read more about Breathing space and mental health crisis moratoriums on Shelter Legal.
Effect of a moratorium on council tax arrears
During a moratorium, the local authority must not take any step to enforce the debt.[1]
Enforcement Agents must cease enforcement action, including if a controlled goods agreement is in force.[2]
How long the moratorium lasts
A breathing space moratorium lasts for 60 days. A mental health crisis moratorium can last for as long as the mental health crisis.
Debts the local authority can recover
The local authority can recover new council tax arrears that are incurred after the moratorium started.
The local authority can continue to recover the debt if the moratorium is cancelled for any reason.
Enforcement that can continue during the moratorium
Enforcement Agents can sell goods that have already been secured and taken into possession following a warrant of control.[3]
The local authority can obtain a final charging order securing the council tax arrears if the interim order was registered before the moratorium started. [4]
The local authority can continue to recover council tax arrears from attachment of earnings where the arrangement was in place before the moratorium started.[5]
Debt relief orders for council tax
A taxpayer can apply for a debt relief order to deal with council tax arrears.
Effect of a debt relief order on qualifying debts
Council tax arrears are a qualifying debt for a debt relief order.
The local authority must not enforce the debt during the debt relief order moratorium. Once the moratorium has ended, the debtor is no longer liable for the debt.
Read more about Qualifying debts in a debt relief order on Shelter Legal.
How the amount due is calculated
Council payments that have fallen due and are unpaid must be included in the debt relief order application. They are a qualifying debt.
Council tax is calculated as a daily amount.[6] The debt relief order can include the amount of council tax due up until the date of the application.
When the debt relief order includes the financial years' tax
A qualifying debt in a debt relief order must be for a liquidated sum payable either immediately or at a certain future time.
Debts that rely on something else occurring like the local authority issuing a bill or reminder notice are known as contingent liabilities. Contingent liabilities are not qualifying debts for a debt relief order and cannot be included in the application.
The debt stops being a contingent liability once the council tax bill for the year has fallen due.
Once a taxpayer has received a reminder notice and the arrears are unpaid after 14 days have passed, the entire year's council tax has fallen due. That means the qualifying debt is the entire year's council tax.[7]
| Recovery stage | Amount to include in the application |
|---|---|
| Arrears only | Sums unpaid to the day of application |
| Reminder notice issued | Once 14 days have passed, the remainder of the bill for the financial year |
Read more about when a reminder notice is served and the entire year's tax is due in Billing and recovery on Shelter Legal.
Debts the local authority can recover after a debt relief order
The local authority can recover new council tax arrears that are incurred after the debt relief order is made.
The local authority can continue to recover the debt if the debt relief order is revoked for any reason.
The local authority can continue to recover the debt if it is deemed it to be fraudulent. Debts incurred through fraud are not written off in a debt relief order, though they do count towards the total debt amount.
Read more about debts incurred through fraud on Shelter Legal.
Bankruptcy for council tax
The taxpayer can apply for bankruptcy to deal with council tax arrears.
Impact of a bankruptcy order on council tax recovery
Council tax arrears are not recoverable once a taxpayer has a bankruptcy order made against them. This applies whether the taxpayer has made themselves bankrupt or a creditor has petitioned for their bankruptcy.
A person is normally bankrupt for 12 months before the bankruptcy debts are discharged. The local authority must not enforce the debt during the bankruptcy. Once the bankruptcy is discharged, the council tax debt is written off.
Council tax liability written off in bankruptcy
A bankruptcy order includes the council tax payments for the remainder of the financial year whether a reminder notice has been given or not. This is because bankruptcy includes contingent liabilities.
This can result in more available income to contribute to the costs of the bankruptcy through an income payment agreement.
Gov.uk has more information about income payment agreements in its guide to bankruptcy.
Debts the local authority can recover after bankruptcy
The local authority can recover new council tax arrears that are incurred after the bankruptcy order is made. This could happen if the taxpayer fails to pay when the new bill is issued in April.
The local authority can continue to recover the debt if the bankruptcy is annulled for any reason.
The local authority can continue to recover the debt if it is deemed to be fraudulent. Debts incurred through fraud are not written off in bankruptcy.
Read more about debts incurred through fraud on Shelter Legal.
Individual voluntary arrangements for council tax
Council tax arrears can be included in an IVA proposal.
An IVA is a form of insolvency similar to bankruptcy. An IVA supervisor prepares the IVA proposal which the creditors vote to approve. If creditors representing more than 75% of the total debt agree, the IVA proceeds.
Effect of the IVA on council tax arrears
The local authority is bound by the terms of the IVA whether it votes for or against the IVA, or does not vote at all. That means the local authority must not take a step to enforce the debt once the IVA is approved.
Individual voluntary arrangements mirror bankruptcy, so the entire financial year's council tax is included.
Debts the local authority can recover after an IVA
The local authority can recover new council tax arrears incurred after the IVA is approved. It can continue to enforce the debt if the IVA is terminated by the IVA supervisor.
Unlike other types of insolvency, there is no provision in law to allow the recovery of fraudulent debts once an IVA has been completed.
Ways to reduce council tax arrears
A taxpayer with a council tax debt might be entitled to:
a discount
an exemption for the dwelling
council tax support
a discretionary reduction in council tax
Council tax discounts
The taxpayer could be entitled to a discount if they are a:
single person household
disabled person
full time student or student nurse
Dwellings exempt from council tax
Regulations exempt some properties from council tax. A property might be exempt if it is vacant, used for a specified purpose, or an annexe.
Read more about exempt dwellings for council tax on Shelter Legal.
Council tax support
Council tax support is available to taxpayers on a low income. Each local authority is responsible for its own council tax support scheme.
Read more about council tax support on Shelter Legal.
Gov.uk has a postcode lookup tool to check council tax discount schemes.
Discretionary reductions
Taxpayers who are already claiming the help they are entitled to and are still in severe financial hardship can apply to the local authority for a discretionary reduction.[8]
A discretionary reduction can reduce the council tax liability to nil.