The government has announced a major overhaul of the way council tax arrears are handled in England, the first significant reform since 1993. The changes are designed to slow down the speed at which missed payments escalate into unmanageable debt, and to require councils to work with residents rather than move straight to enforcement.
From April 2027, households who miss a monthly payment will have 63 days, roughly two months, before they can be made liable for the full annual bill. Councils will also be required to offer repayment plans, provide clearer communication, and take vulnerability into account before pursuing legal action.
Key Points at a Glance
- 63 day protection period - households will have around two months to respond before losing the right to pay in instalments.
- 12 month billing becomes the default - bills spread over 12 months instead of 10, lowering each monthly payment.
- Liability order costs capped at £100 - councils will no longer be able to add unlimited administrative charges to small debts.
- Councils must offer support first - new guidance will require repayment plans and vulnerability checks before escalating to enforcement.
- SMI discount to be reformed - the Severely Mentally Impaired council tax discount will be renamed and given a standardised national application form.
- Changes take effect from April 2027, following guidance development and a new burdens assessment for councils.
Why Is the System Changing?
Under the current rules which date back to 1993, missing a single monthly council tax instalment can set off a rapid chain of events. Within two to three weeks, many councils send a final notice demanding the entire year's remaining bill. If the household cannot pay, the council can apply to a magistrates court for a liability order, adding administrative costs on top of the original debt. Bailiff action can follow shortly after.
Ministers say this system is outdated, confusing, and disproportionately harsh, particularly for people who are already in financial difficulty. The current rules treat one missed payment in the same way as persistent non-payment, and give households very little time to respond or seek help.
Local Government Secretary Steve Reed said the reforms would stop families being "terrified of bailiffs knocking on the door because one month's council tax bill was missed."
What Is Actually Changing?
A New 63 Day Protection Period
From April 2027, if a household misses a monthly payment, councils will be required to issue a reminder notice. The household will then have 63 days roughly two months to respond and agree a repayment plan. Only after that period has passed, and if no plan has been agreed, can a council move to demand the full annual bill. This replaces a process that currently allows escalation within weeks.
12 Month Billing as the Default
Council tax bills will be spread across 12 monthly payments instead of the standard 10. This reduces the size of each individual payment. Households who prefer to pay over 10 months can still opt in to that arrangement.
Liability Order Costs Capped at £100
When councils apply to a magistrates court for a liability order against a household, they currently add administrative costs to the debt. There is no fixed cap on these fees, which means a relatively small arrear can grow significantly through charges alone. The new rules will cap those costs at £100, limiting how far a small debt can escalate through administration fees.
Councils Must Offer Support, Not Just Enforcement
New guidance will require councils to issue clearer reminder notices, offer repayment plans as a first step, and consider a household's vulnerability and financial hardship before escalating to enforcement action. The intention is to shift councils from a rapid enforcement model to one that prioritises early engagement.
Reform of the Severely Mentally Impaired Discount
The government plans to update the name and definition of the Severely Mentally Impaired (SMI) council tax discount, which exempts eligible individuals from council tax, to reduce stigma associated with the current terminology. A standardised application form will be co-designed with disability charities to make the process clearer and more consistent across local authorities.
The Role of Martin Lewis and Campaign Groups
MoneySavingExpert founder Martin Lewis and the Money and Mental Health Policy Institute have campaigned for 18 months to bring about reform of council tax enforcement practices.
Martin Lewis described the current system as "the most vicious and damaging form of legal debt collection out there," arguing that no commercial lender would be permitted to escalate debts as quickly as council tax rules allow. He welcomed the announced reforms as a "huge first step" toward a fairer system.
What Does This Mean for Households?
If You Fall Behind on Payments
Under the new rules, if you miss a monthly payment you will have more time to respond around two months before the council can demand the full remaining bill for the year. Councils will be required to contact you with clear notices, offer a repayment plan, and take your circumstances into account before pursuing legal action. Costs, if a liability order is sought, will be capped at £100.
If You Pay Monthly
Your bill will automatically be spread over 12 months instead of 10, which means each individual payment will be slightly lower. If you prefer to continue paying over 10 months, you will be able to opt in to that arrangement.
If You Are Eligible for Discounts
The reform of the SMI discount will make the process of applying clearer and less stigmatising. A single standardised form, designed with disability charities, will replace the patchwork of different local approaches currently in use across England.
When Do the Changes Take Effect?
The 63 day protection period, 12 month billing default, and liability order cost cap are all expected to come into force in April 2027, at the start of the 2027/28 council tax year. Councils will spend the 2026/27 year preparing for the new system. The government will publish detailed guidance for councils alongside a new burdens assessment.
Further consultations are planned on several related areas:
- Council tax disregards for apprentices and carers
- Improvements to the council tax band challenge process
- A proposed High Value Council Tax Surcharge
Wider Local Government Context
The council tax reforms sit within a broader government programme described as "fixing the foundations" of local government. Ministers point to a range of accompanying measures, including the first multi year financial settlement for councils in a decade, a 24.3% increase in Core Spending Power, and funding allocations described as broadly matching need for nine in ten councils.
The government says these financial changes will give councils greater certainty to plan ahead, making it easier to adopt the new arrears guidance effectively.
What Happens Next?
The government will publish detailed guidance for councils during 2026, alongside the full response to its consultation on modernising council tax administration. Further proposals on council tax support and banding challenges will follow through separate consultations.
Councils will begin preparing for the new framework throughout 2026 ahead of the April 2027 implementation date. The full impact of the changes will depend on how councils put the new guidance into practice and how the forthcoming consultations shape the next phase of reform.
Key Takeaways
- The government's reforms are the most significant change to council tax arrears rules since 1993.
- A 63 day protection period will give households around two months before councils can demand the full annual bill.
- Monthly bills will be spread over 12 months by default, reducing each individual payment.
- Liability order administrative costs will be capped at £100, preventing small debts from growing through charges.
- Councils will be required to offer repayment plans and consider vulnerability before escalating to enforcement.
- The SMI council tax discount will be reformed to reduce stigma, with a standardised national application form.
- Changes take effect from April 2027, with councils preparing throughout 2026.
📚 Sources & Further Reading
-
GOV.UK — Council tax shake up to protect the most vulnerable households
Archived copy (OGL): archived page -
GOV.UK — Modernising and improving the administration of council tax (consultation)
Archived copy (OGL): archived page
AI Use: AI tools were used to support source discovery and to structure the article for clarity. All research, verification, drafting, and final editorial decisions are fully human led.