Current rules mean that within weeks of missing a council tax payment, potentially ruinous action can be taken.
The report suggests that this can mean facing a demand to pay the full annual bill, as well as threats of imprisonment.
It can also mean the rapid escalation of debts to intrusive bailiff enforcement and escalating fees.
Overhaul of council tax arrears
Debt charity StepChange examined the way council tax arrears are collected as part of its new report, Looking through the Keyhole.
It is calling for an overhaul of the system to help those who are struggling with their finances.
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It insists that an overhaul is needed because current collection practices are causing “significant harm” to cash-strapped individuals.
This includes causing damage to their health, wellbeing and relationships.
The average amount of council tax arrears per StepChange client stood at £1,726 in 2023, up from £1,146 in 2019 – an increase of 50%.
No standards for local authorities
There are currently no binding standards for local authorities to help those struggling to pay their council tax.
It means there is a “postcode lottery of support” depending on where someone lives and which council they are relying on for assistance.
The report suggested: “Aggressive council tax collection practices are commonplace and counterproductive, and the most vulnerable households are often on the receiving end.”
‘Increasingly unaffordable burden’
The research went on to reveal that the “increasingly unaffordable burden” of council tax, and the subsequent collection journey, can often worsen debt problems.
It means people are often making impossible choices between utility bills, rent, mortgages, or even a healthy diet to keep up with council tax.
Drawing on research into StepChange’s clients alongside national YouGov polling, the report finds that those going through harmful enforcement action are left feeling trapped and unsafe in their own homes, unable to leave and yet scared of a knock at the door.
YouGov polling shows that 6% of adults have fallen behind on their council tax in the last 12 months, which StepChange’s analysis estimates at more than three million people.
At the same time, the latest figures from the Ministry of Housing, Communities and Local Government show unpaid council tax topped £6bn last year, an increase of 46% since 2018-19.
The survey found that only 5% of clients said their council took their personal situation into account, including vulnerabilities, before taking further action on their council tax arrears, and a third – 34% – of clients who agreed to a repayment plan could not keep up with it.
A total of 85% surveyed by StepChange said the communications they received from their council about their arrears made them feel scared, anxious or depressed.
More than half – 53% – of clients surveyed who experienced bailiff action said enforcement agents put pressure on them to make unaffordable repayments during visits to their home.
Meanwhile, 34% said bailiffs displayed intimidating or aggressive behaviour.
The vast majority of clients who experienced bailiff action said it negatively impacted both their mental health (reported by 95%) and physical health and wellbeing (reported by 91%), as well as their ability to get enough sleep (reported by 94%).
Three changes
StepChange is urgently calling on the Government and local authorities to take three crucial steps.
First, it says the Government should prioritise council tax affordability by increasing funding for council tax support for those who can’t pay.
Secondly, it is calling for an overhaul of national regulations and guidance, ending counterproductive demands for immediate repayment and the threat of imprisonment, and embedding a binding set of standards and steps to support people who are struggling to agree repayment .
It says this is the only way to ensure escalation to enforcement is a last resort.
Finally, it would like to establish a statutory regulator of the bailiff sector and stamp out poor conduct by putting the Enforcement Conduct Board on a statutory footing.
‘Outdated council tax collection’
Vikki Brownridge, chief executive of StepChange, said: “Rising council tax and a postcode lottery of support are making it harder and harder for many people to keep up.
“Aggressive debt collection practices are counterproductive, from troubling treatment of arrears to unhelpful communication, to harmful enforcement action, the current council tax collection journey is at best outdated and at worst dangerous for people who fall behind on this bill.
“It’s creating harrowing outcomes for many vulnerable households. While we understand that councils need revenue to fund essential public services, a fundamental overhaul is needed to ensure the system is constructive for all involved.
“Looking ahead to the Budget, we want to see increased funding for council tax support and reform to council tax debt collection practices as a priority.”
She continued: “Vital to this is the creation of a binding set of standards across local authorities to support those in council tax arrears.
“As part of a wider package of change, we want the Government and councils to look compassionately to support the most vulnerable, rather than push them deeper into hardship at a time when people are struggling to make ends meet.”
