Council tax rules are changing: Expert explains how it could affect the amount you pay

Millions of residents in England could soon face a major overhaul of the council tax system, led by Deputy PM Angela Rayner, in a bid to address the current "broken" system. A Government consultation has been launched, focusing on reforming how council tax debts are collected, how discounts are applied, and unequal funding between areas.

The proposed changes aim to help those struggling to pay their council tax, particularly those in arrears. According to Ocean Finance's debt management expert Fiona Peake, "The council tax system just doesn't work for people who are struggling. Missing a single council tax payment can trigger a chain reaction."

Under current rules, missing a payment can lead to the council demanding the entire annual bill upfront just three weeks later. With the average band D tax bill standing at £2,280 this year, this can be a significant burden on households.

The expert notes that, unlike credit cards or loans, council tax is treated as a priority debt, allowing local authorities to take swift action. The consultation is seen as a welcome move, she added:"This consultation is long overdue."

Fiona warned: "Fail to pay, and the council can apply to court for a 'liability order'. Which opens the door to bailiffs, wage deductions, or money being taken from your benefits."

Meanwhile, the UK Government's plans seek to extend the time before which councils can demand the full yearly bill from a household that has missed payments. The proposals are also aiming to put a cap on the costs incurred by households when liability orders are issued.

The public consultation remains open until September 12, inviting feedback on the existing council tax arrangements and the suggested amendments. However, Fiona said: "The Government has promised to crack down on these harsh tactics, but new rules aren't in place yet."

She strongly advises people to steer clear of council tax arrears and shares her prime tips for handling debts, starting with suggesting that residents should be forthright with their council about their financial situation. Fiona pointed out: "Councils can't ignore unpaid tax, but many will set up affordable payment plans if you reach out."

There are various council tax discounts and exemptions hinging on who occupies the abode. For some residents, this could slash their tax bill to nought.

These benefits are presently under review as part of the consultation process, so it's worth checking what support you're eligible for now, or potentially after the regulation changes.

Fiona stated: "You could be overpaying by hundreds each year if your property is in the wrong band. You can check and challenge it for free at GOV.UK. If successful, you could lower your bill and get a refund for past overpayments."

If you are finding it tough to manage council tax bills and unsure of your next step, there are several free debt advisors available through platforms such as Money Wellness or Citizens Advice.

Fiona added: "They can help you deal with court letters, bailiff threats, or just understanding your options. They can also talk to the council on your behalf and help stop things escalating."

The proposal also includes the potential to alter the default council tax payments from 10 months to 12 months. This would make each payment smaller as it's more spread out, reducing confusion and admin for households.