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The Costs of Collection: The high price of council tax debt collection

26 April 2019

The Costs of Collection: The high price of council tax debt collection [ 1.1 mb]

Council tax is increasingly a cause of financial difficulty and problem debt. In 2018, there was more than £3 billion of outstanding council tax debt and an estimated 2.2 million households were in council tax arrears.

At Citizens Advice we help people with the consequences of this widespread problem. Council tax debt is the most common debt we help people with - last year we helped more than 96,000 people struggling to make payments.

The problems people in council tax debt face are particularly stark due to the way council tax debt is collected. A third of council tax debt problems we helped people with were related to debt collection compared to just 8% of credit card problems.
The poor collection practices we see are largely the result of the outdated regulations governing council tax collection. Three aspects of the regulations are particularly harmful:

  • When people miss a single council tax payment, regulations stipulate they should become liable for the full year’s outstanding tax. That means a missed payment on an average Band D property of £167 can increase to a debt of £1671 within 2 weeks of receiving notice.
  • Councils have limited powers to recover council tax debt without getting a court order. The encouragement to get a court order leads to frequent use of bailiffs and adds significant additional costs (an average of £84 for a court order and £310 for bailiff fees) onto people’s debts.
  • In England, people can still be sent to prison for falling behind on their council tax. While the power is rarely used it undermines efforts to make council tax debt collection less punitive

The collection practices encouraged by regulations are expensive and make people’s financial difficulties worse. Most evidently, a combination of court costs and bailiff fees add large sums to people’s debts.

  • In total in 2016/17, people in council tax debt paid an estimated £129 million in bailiff fees and court costs on top of their arrears.
  • However, as people in debt often can’t afford repayments not all fees and court costs were paid. In the same period, a total of approximately £560 million was added to people’s debts as a result of court and bailiff costs. That is equivalent to adding nearly £278 to every households’ debt that was in council tax arrears.

Those costs can trap people in debt. On average Citizens Advice debt clients have just £14 a month disposable income. Average court costs and bailiff fees of £278 per household in arrears mean an additional 20 months of being in debt.