Unpaid council tax arrears in England have reached a record £7.4 billion, according to recent figures, marking a sharp increase amid ongoing financial pressures on households. The amount owed by residents has grown by £782 million over the past year, reflecting the continued strain of the cost of living crisis.
The rise in arrears comes as council tax bills have also increased, with the average Band D tax charge in England rising by £111 to £2,392 from April 2024 — a 4.9 percent hike. This follows recent energy bill increases, with household gas and electricity costs up 4 percent this month and expected to climb a further 16 percent (£276) in January.
The surge in unpaid council tax coincides with mounting economic challenges for many families. Analysis by the Centre for Social Justice (CSJ) think tank estimates that around 1.8 million households were behind on council tax payments between 2022 and 2024, an increase of 400,000 from the previous two-year period. Since 2020-21, arrears have risen by more than £500 million annually, climbing from £4.97 billion in 2021-22 to the current figure projected for 2025-26 — an overall increase of nearly 50 percent.
The rising financial burden places additional pressure on Chancellor John Healey ahead of his Budget announcement this week. The Chancellor is anticipated to introduce measures aimed at supporting lower-income households with energy bills and plans to freeze fuel duty. These initiatives are expected to be financed through increased taxation on banks and a reduction in the Government’s fiscal headroom from £23 billion to approximately £15 billion.
In response to growing concerns about council tax debt, Labour has proposed reforms to collection methods to prevent households from falling further into arrears. The CSJ has advocated for more comprehensive government action, emphasizing the role of improved communication, earlier assistance, and accessible advice services to ease the collection process. Ben Gregg, head of welfare at the CSJ, stated that council tax arrears deepen financial hardship for struggling families but highlighted that the Government holds the tools to mitigate the issue through practical changes.
The Department for Levelling Up, Housing and Communities emphasized recent measures intended to make council tax payments more manageable. A department spokesperson noted that moving to 12 monthly payments by default and capping recovery fees at £100 are designed to provide relief. Additionally, new reforms will require local authorities to direct taxpayers to trusted advice services as part of debt recovery efforts.