What Labour’s new council tax shakeup means for you as Martin Lewis ‘welcomes’ changes | Personal Finance | Finance

The Labour Government has confirmed reforms to the current council tax debt collection system. It will give vulnerable people more time and support to settle their outstanding payments, with money expert Martin Lewis “welcoming” the changes.

From next April, households that fall behind on their bills will no longer be forced to pay the full year’s amount just two weeks later. They will be given 63 days to settle the bill, with help available from councils to create a sustainable repayment plan. Meanwhile, council tax bills will be paid over 12 months, rather than 10, and the amount councils can charge as an administration fee has also been capped at £100.

Martin Lewis, who describes the current system as the “most vicious and damaging form of legal debt collection out there, is in favour of the changes. He has campaigned for reforms over the last 18 months and describes the move as a “huge first step forward towards making things better”.

In a post on X, Mr Lewis wrote: “The new rule from next April means councils must wait two months, not 3 weeks, to ask for a year’s money, and the ‘admin costs’ will be capped at £100. In a perfect world, it would be even longer and the lower cap would apply, but this is still a hugely welcome change to a 33-year-old process.”

Meanwhile, StepChange, the UK’s leading debt charity, has also welcomed the changes. Their data shows that council tax is the second most common type of household arrears, topping £2,531 year to date.

The statistics also show that 36% of UK adults are worried about paying their council tax over the next six months. This is higher than the 23% figure in January.

Vikki Brownridge, Chief Executive Officer at StepChange Debt Charity, said: “Being hit with such a large bill at short notice has for too long been a massive hurdle for people attempting to get back on the road to financial stability. Changing the timeline escalation from one missed payment to three will positively mean households have more time to engage constructively with their local authority, seek debt advice, and reach affordable arrangements – ultimately giving them more room to repay.

“What’s more, introducing, for the first time, statutory steps councils have to take to support residents ahead of enforcement action, as well as a cap on liability orders, will ease the burden on our clients and residents struggling with council tax arrears and managing their payments.”

She added: “But whilst this is a step forward, to truly make council tax debt collection a fairer and more modern system, the Government should go further by scrapping the outdated sanction of imprisonment for non-payment, a measure that has already been removed in Scotland and Wales and simply does not belong in the 21^st century.”

The new council tax debt repayment rules were announced on Wednesday (April 15). They will take effect from April 2027 and aim to make debt collection less aggressive.

The new rules will give households more time to catch up under the 63-day rule. At the moment, missing one payment can lead to a demand for the entire year’s council tax within two to three weeks, but councils will have to wait 63 days after a missed payment before they can demand the full annual amount under the new reforms.

Local councils will also be required to set up repayment plans to support residents. They will also offer extended support before taking formal enforcement action.

Councils will no longer be able to add unlimited administration fees if you fall behind on payments. Under the new rules, these costs will be capped at £100.

Finally, councils will move to 12-month billing as opposed to the common 10-month structure. However, you can still stick with the current payment period.