If you’re late paying council tax, you’re certainly not alone- in 2019, £3236 million was owed to councils across the UK.
However, if you find yourself in arrears you need to take action, as things can quickly get quite serious. Try not to panic though; being proactive about your situation can go a long way to putting things right again.
What Is Council Tax and Why Do I Pay It?
Council tax funds about 25% of the budget for Local Authorities in the UK, and goes towards paying for public services in your area.
Part of the reason councils is endowed with such strong powers to recover arrears is they would not be able to do their job properly effectively without this funding.
How much council tax you pay depends on lots of different factors, including who you live with and how much you earn. For most people, the deciding factors in how much council tax they pay are which local authority they live in and how much their home is worth.
Council tax rates vary slightly from council to council, but all authorities use a banding system to decide how much tax you pay. The banding system is a sliding scale of council tax based on the value of your home, where ‘Band A’ covers the least expensive properties and Band H covers the most expensive.
The higher you move up the bands, the more tax you pay.
|You may be able to get a discount on your council tax bill if:|
|– You have a very low income|
|– You are the only adult in your home – the classification of ‘non-adults’ is unusual and includes groups of people such as student nurses and people on apprenticeships. You can check the full list by visiting gov.uk council tax.|
|– You live alone|
|– You are a student or live with students|
|– You receive income support or certain other benefits|
|– You are in the armed forces|
|– You care for someone who is severely mentally disabled|
|– You have a disability|
|– You are in prison|
|– Your property is empty (either because you have moved into care, or it is a second home)|
|– You are a care leaver|
Stages of Council Tax Debt
Council tax is considered a ‘priority debt’ because councils have strong powers which allows them recover your arrears. This means if you can’t afford all of your debts, you should prioritize council tax along with secured debts such as your mortgage, before paying off any unsecured debts such as credit cards and overdrafts.
Before thinking about how to manage your council tax debt, it is important to understand the different stages of council tax debt and the powers the council has to recover arrears, as this will affect the options open to you.
1 – When you are first late paying your council tax, the council will send you a letter, giving you 7 days to pay up before they take any further action. If you can pay within 7 days, the arrears will be taken care of you can carry on as normal.
2 – If you don’t pay within 7 days, the council will issue you with a ‘final notice’. The final notice is a bill for all of your remaining council tax for the rest of the year. You have 7 days to respond to the final notice before the council takes further action. You can also be sent a final notice if you are late paying council tax for the third time in a year.
3 – After 7 days, the council will request a ‘liability order’ from the court, to get permission to forcibly collect the debt from you. You will receive another, which includes the date and location of the hearing. You only need to attend the hearing if you believe the council has made a mistake (for example, if you have already paid, or no longer live at that address). The council may choose to add the court costs to your council tax bill.
4 – After obtaining a liability order, the council will write to you asking for information about your income and outgoing. You have 14 days to reply, after which the council will move into the debt recovery phase.
5 – If you don’t come to an agreement with the council before a liability order is issued, the council will enforce debt recovery. There are a number of ways they can go about this, and each council will have a slightly different policy. In all cases, you should be kept informed of the actions being taken against you.
Council Tax Debt: Income Deductions
If the council thinks you can afford it, they will take installments directly from your salary or benefits until your debt is repaid. If you earn a salary, deductions are between 3-17% of your net pay, depending on how much you earn.
Council Tax Debt: Bailiffs
The council could choose to send bailiffs to your home to recover he debt. The bailiffs need to give you seven working days’ notice in writing before turning up at your home.
You do not have to open the door to them; when entering a property for the first time the bailiffs must do so peacefully and through an unlocked door.
However, their debt collection order lasts for 12 months, so they are likely to visit more than once.
If bailiffs gain entry to your home, they will take an inventory of your property and can confiscate ‘luxury items’ for sale at auction. This includes things such as television, laptops, games consoles.
Your vehicle is considered a luxury item, even if you require it for work. Items such as cookers, fridges, bedding and tools worth up to a total of £1350 are considered essential and cannot be confiscated. The rules surrounding what bailiffs can and cannot do are quite strict and complex, so if you are expecting a visit, it is a good idea to consult with a debt charity.
Bailiffs are private contractors and charge fees which are added to your debt.
A standard visit bailiff costs £420, plus any fees for storage of your belongings. If your debt is more than £1500, they may charge you extra.
Council Tax Debt: Charging Order
If you own your home and owe more than £1000 in council tax, the council could ask for a charging order to be placed on your property. This means that your council tax debt becomes tied to your home, like a mortgage. If this happens, you will need to keep up with payments or your home could be at risk.
Council Tax Debt: Bankruptcy
In extreme cases, the council could try to make you bankrupt. For them to do this, you must owe more than £5000 in total. You should be aware that debts spanning different years can be added together.
To force you into bankruptcy, the council must first file something called a ‘statutory demand’. The council can ask for you to be declared bankrupt at county court 21 days after issuing the demand.
Council Tax Debt: Imprisonment
In very rare cases, councils in England, Scotland and Northern Ireland could ask the courts to consider imprisonment of up to 3 months. This is extremely rare and should only ever be used in cases where people have deliberately chosen not to pay their council tax.
|Did you know…..?|
|Council tax debt is the third most common debt for household expenses|
|In 2019, the average council tax debt was £1089|
|Britain owed £3,236 million in council tax at the end of 2019|
Council Tax Debt: What Action Should I Take?
Before You Get Into Debt
Speak to the council
If you know are struggling to pay your council tax debt, contact your council to discuss this with them as soon as possible. If you have a very low income, they could reduce your bill.
Ask for your payments to be spread over 12 months
Council tax payments for the year are paid in 10 instalments by default, but if you make a request to pay in 12 instalments, your council has to let you. This could help to lower your payments.
For example, instalments on a £1200 bill could be reduced from £120 to £100 by spreading the payments over 12 months.
Before Debt Enforcement
If you have received a warning that you are in debt with the council, but have not yet been issued a liability order by the courts, there is still time to work things out.
Get in touch with the council
Ask them what options are available to you. If you negotiate with them, some councils may let you make a payments slightly late without pursuing further action, or let you spread the cost of the missed payment.
Come up with a payment plan
If you can’t afford to pay right now, present a payment plan to your council using your budget and ask them to consider the offer. Make sure to include your council tax reference number and liability number.
If you really can’t afford to make the missed payment, it is a good idea to start making payments according to your plan, even if the council rejects the offer. This will start clearing your debt and could help you further down the line.
Once Debt Enforcement Has Started
Try and negotiate with the council
If you have started making payments to the council, contact them and ask them to recall the notice on the bailiffs. You can point to your payment record as evidence that you are willing to address the debt.
Contact bailiffs before they come to your home
Present them with a budget and repayment plan and try to negotiate for cash repayments of your debt. If the bailiff accepts your installments, you could take evidence of this back to the council and ask for the debt to be transferred back to them.
Consider taking an ‘individual voluntary agreement’ (IVA)
If you have a regular income, you could consider taking out an IVA to pay off your debt. For a fee (factored into monthly payments), an insolvency practitioner or debt management company will help you negotiate with the council for a legally-binding payment plan set according to your own budget. IVA’s span 5 -6 years, and leave a footprint on your credit file.
You won’t be able to take out credit worth more than £500 during this time, and if you come into money will be expected to use if to pay off your IVA. However, it could be a suitable option if you can’t find another way to clear your council tax debt. The debt counsellor will negotiate with the council and collection agencies on your behalf and handle the distribution of your payments.
Think about debt consolidation
If you can’t afford to repay all your council tax debt at once, you could consider taking out a debt consolidation loan to pay off the council and spread repayments over a term that suits your circumstance. Normally, lenders will require you to have good credit to take out a loan. If you have bad credit, you could still get a loan but may be asked to secure it against your assets, such as your home.
You should carefully consider whether this is right for you, as your home could be at risk if you don’t keep up with repayments. On the other hand, if you do keep up with repayments, it could help you rebuild your credit score
Apply for debt relief
If you live in England, Wales of Northern Ireland, have a low income and do not own your own home property, you could consider applying for a DRO. DRO’s cost £90 to set up and put a 12-month hold on your debts.
If you are still unable to pay after 12 months, your debts are written off. You should be aware that if you take out a DRO it will be reflected on your credit file.
How Can Love Debt Free Help?
Here at Love Debt Free, we have partnered with some of the UK’s leading Debt help companies.
They have already helped thousands of people reduce and manage their debts, and they can do the same for you.
Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these debt help companies, click on the below and answer the questions.