Guidance

Council tax collection: best practice guidance for local authorities

Published 16 August 2021

Applies to England

Ministerial foreword

Council tax is an essential source of local government revenue. Authorities use it to deliver quality public services, from caring for the most vulnerable in our communities to keeping our streets clean and safe. That is why it is vital that authorities have sufficient powers to recover arrears from households that do not pay on time.

However, tax collection and enforcement should never come at the cost of fair treatment of residents. Local authorities are working innovatively to deal with the needs and circumstances of debtors while maintaining high rates of collection and the prevention of arrears.

This work has continued throughout the coronavirus pandemic. Councils’ tireless efforts, from shielding the vulnerable to accommodating rough sleepers and supporting businesses, have kept the nation safe during what is undoubtedly the most challenging time in many of our lifetimes. At the same time, authorities have supported residents by rescheduling council tax payments to support their budgets, and continued to reduce bills through their council tax support schemes.

The Ministry of Housing, Communities and Local Government has been working with experts in local government, debt advice and civil enforcement to identify the best practice that already exists in council tax collection. This guidance brings together this local expertise into one document.

Luke Hall MP
Minister for Regional Growth and Local Government

1. Introduction

Council tax provides an important and increasing proportion of the funding which enables local authorities to provide vital services including adult social care, children’s services, refuse collection, and leisure facilities. The efficient collection of council tax allows local authorities to consistently make this broad range of services available to the wider community.

In 2020-21, authorities in England issued council tax bills to more than 24 million bills, and collected £32 billion in council tax revenue to help fund local services. For the vast majority of taxpayers, this system operates smoothly and effectively, allowing authorities to collect significant amounts of revenue with limited intervention.

Where residents do not pay on time, authorities face a range of choices about how and when to use their discretionary and statutory powers to facilitate payment and recover arrears.

Just as people fall behind with their payments for a variety of reasons, there is no one-size-fits-all approach to collecting council tax arrears. However, the experience of innovative authorities suggests that investing in supportive recovery techniques can significantly improve outcomes, both for authorities and for debtors.

By focusing on clear communication, joined up working with debt advice services, and critical choices of enforcement methods, these local authorities are increasing collection while ensuring fair treatment of residents.

2. Preparing for supportive council tax collection

Billing authorities begin the preliminary work that shapes their collection systems long before the first bill is issued for a new financial year. These vital preparations will often significantly improve billpayers’ journeys as the authority collects council tax over the course of the year.

An important part of this preliminary work is the design of each authorities’ Local Council Tax Support (LCTS) scheme. These schemes reduce liability for qualifying individuals, and ensure that financially vulnerable households receive a council tax bill that reflects their circumstances.

As well as Local Council Tax Support, a resident’s bill can be reduced by a wide range of discounts and exemptions that reflect individual circumstances. Many authorities actively identify discounts and exemptions that residents may be entitled to, as well as encouraging application for LCTS.

They ensure that frontline staff have the right knowledge and information to give accurate advice to those council tax payers who may have limited understanding about the support that is available. This helps to ensure that everyone pays the right level of council tax, which can be crucial in supporting those who are potentially financially vulnerable.

Information about the range of support available has been published by MHCLG in its Plain English guide to council tax.

Many authorities make links between their teams to enable a joined-up approach to council tax administration. This may include linking the council tax support system with the authority’s other systems of providing support, such as housing benefit.

Some authorities are working towards a ‘single view of debt’ to ensure that multiple debts are brought together onto a single system, so that they can offer well-informed support if households fall behind in their payments. Progress towards this goal has already ensured consistency in the treatment of different types of debt, the consolidation of different arrears, and provided greater insight into the circumstances of residents in financial hardship.

At a larger scale, district and county councils have the opportunity to engage across tiers in order to share resources and data. Upper and lower tier authorities may wish to consider the efficiency savings of pooling resources, or creating cross-authority shared services. Authorities have also met in larger regional groups in order to discuss recent trends in their collection work and share best practice.

Revenue managers of billing authorities across Lancashire meet every 3 months in order to explore and better understand the latest trends in council tax collection. These meetings allow authorities to discuss solutions to emerging challenges, such as ensuring that residents are informed about council tax support.

They also provide a forum where pilots being trailed in different areas can be showcased, such as a project to identify a targeted cohort of residents that are invited in to speak to the welfare and benefits team.

In some cases, authorities have developed their own formal recovery and enforcement policy, which can outline the authority’s strategy for dealing with cases involving vulnerability. This might include a commitment to ensuring that debtors who display vulnerability go through a different enforcement process, such as working over a longer period to manage the arrears and bring about financial recovery. It may also outline the authority’s approach to council tax reductions under section 13A of the Local Government Finance Act 1992, in cases of exceptional financial hardship.

The Cabinet Office’s Fairness Group have developed a Vulnerability Toolkit which draws together existing tools used in the support of vulnerable customers.

The Toolkit contains simple steps that can be taken to help identify vulnerability and take part in supportive conversations. By reflecting on the document, authorities can leverage the success that the adoption of these tools has brought to other sectors.

3. Working with the debt advice sector

Local authorities should take all necessary steps to ensure that residents receive clear advice and support throughout the process of collecting council tax. Many revenues teams seek to build strong working relationships with independent debt advice bodies. Investing in cross-sector cooperation can prompt faster collection and fewer repeat arrears cases. This will improve outcomes for residents – particularly those facing financial or mental health challenges – and produce downstream savings for local authorities.

Authorities should be open to working with debt advisors at any point in the collection process. These relationships can be strengthened by agreeing single points of contact between the authority and debt advice sector bodies. In some cases, authorities have gone further by co-locating some staff members in the same offices as a local debt advice service. This enables the authority to more easily and effectively update advisors on the progress of a case, and advisors to engage directly with the authority.

Similarly, some authorities arrange regular meetings with local debt advice agencies in order to ensure each group is fully sighted of the local trends in council tax collection. In other cases, authorities have organised ‘drop-in’ sessions in association with local debt advice bodies, encouraging local residents to engage with the authority and have the opportunity to receive debt advice. This collaborative approach ensures there are effective channels of communication open between authorities and advisors, so that repayment plans can be efficiently discussed and agreed.

The government has introduced a statutory breathing space scheme, giving people in problem debt the opportunity to take control of their finances and move onto a sustainable footing.

Individuals who enter a breathing space moratorium will be given legal protections from most enforcement action, fees and charges for up to 60 days while they receive debt advice and enter an appropriate debt solution or plan.

The mental health crisis moratorium will provide these protections to people receiving mental health crisis treatment, lasting for the duration of their crisis treatment plus 30 days. The government has published guidance for creditors, which contains further information.

Many authorities have internal debt advice and support services to assist residents who may be in debt. Forging strong links with other debt providers who work outside the authority can significantly improve outcomes for residents, allowing greater information and evidence gathering, particularly in hard-to-reach cases. This, in turn, can help authorities engage proactively with residents earlier in the collection process, and make more informed decisions about sustainable repayment plans or further enforcement.

North Lincolnshire and North East Lincolnshire councils, who have a shared service agreement, are two of the many councils enhancing their working relationships with local debt advice providers.

The councils have taken steps to enable advisors to shadow the revenue and benefits team. This created a mutual understanding of how the councils and advisors approached council tax collection. It also led to an increase in dialogue between the councils and advisors.

Having developed these relationships, the councils work to consider all debts when engaging with residents and will also offer advice on debt management, where appropriate.

Local authorities may also wish to look at councils who have gone beyond traditional advice services to build partnerships within the community.

North Warwickshire Council uses its Financial Inclusion Partnership to help residents access the right information and services according to their needs.

Financial Inclusion Support Officers work with local debt advice, charities and community food projects to engage hard-to-reach people. This work includes offering money management advice and referrals to debt advice, in order to find the solutions that best support residents.

Specialist advice is also offered during drop in sessions across the region on income maximisation, universal credit and council tax support. In this way, the council has significantly increased levels of engagement with local communities.

Many authorities regularly review their signposting and referrals processes to maximise the opportunities to guide people towards free debt advice, where appropriate. Authorities often signpost to face-to-face agencies, and may wish to make sure they also provide details of telephone and online advice agencies so that billpayers can receive the help that best suits their circumstances.

The government sponsored Money and Pensions Service (MaPs) has launched the Money Advisor Network (MAN) to help with referrals to independent debt advice.

Their Virtual Contact Centre provides a single point of entry for referrals to a panel of debt advice agencies who will be able to assist those who may have fallen behind on their council tax payments.

There is also a ‘customer self-referral option’ which could be added to an authority’s website, letters, or text messages. This would allow taxpayers to submit their own details for a call back from a debt adviser or to be connected with an online debt self-help tool.

4. Engaging with billpayers

Communications with residents should be designed to prompt timely payment from residents who can pay, and early engagement from those who may have difficulties in keeping up with paying the necessary instalments on their bill, and may be in broader financial difficulty.

Local authorities face a considerable challenge in managing the scale of the billing process, and the engagement that is necessary to support residents. To help navigate this challenge, some authorities actively work to reframe the content of their bills and improve the effectiveness of their communication.

For example, some authorities have taken steps to simplify the text in their letters as far as possible. Their experience suggests that even subtle changes can improve clarity of communication between residents and the authority, facilitating more regular payments and earlier requests for support.

Some authorities have incorporated ‘social norming’ into their behaviourally-informed letters. By highlighting the fact that a very high proportion of council tax is paid on time, letters can nudge residents towards payment and have increased collection rates.

Salford Council has adapted the tone of their messaging and chosen to use letters as an opportunity to explain in plain English what services council tax is used to fund.

The council’s website allows residents to quickly check whether they are entitled to benefits or council tax reductions, and will automatically complete parts of the relevant form to support a resident’s claim.

For those who are not online, in all relevant communications the council offers suggestions about the range of steps that could be taken by residents who might be struggling to pay council tax. Residents are informed that they can change their payment plan dates, and frequency, to suit their budget.

To maximise the chances of timely payment and early engagement, authorities may wish to ensure that communications with their bills convey, in clear and simple terms:

• the services that council tax pays for
• the range of options available to pay the bill – this includes alternative instalment schedules, setting up direct debits on a range of different dates in the month, and paying through alternative mechanisms such as over the phone or online, where this is possible
• the availability of discounts, exemptions, and council tax support schemes
• the best way for residents to contact the authority and at least one debt advice body, should they find themselves in financial difficulty
• clear and understanding explanation of the consequences of non-payment

Authorities may also wish to signpost billpayers to the government’s Plain English guide to council tax, which sets out the discounts, exemptions and support available within the system.

There may be some residents who have concerns about their finances, and are worried about the consequences of missing payments when they receive their bill. To support such groups, the Money and Pensions Service has introduced their Money Navigator Tool.

This is a simple online diagnostic that helps consumers find the general money guidance that they need. After answering a series of questions (in under 30 seconds) the tool will provide tailored guidance on individual money matters and, where appropriate, it directs them to specialist third party advice that can help with problems.

Further information on how referral partners can use the tool in their own communications can be found in the communications toolkit (ZIP file, 6.64MB).

In some cases, revenues teams have developed localised reminders that are delivered through multiple platforms, including text, email and online portals. These reminders draw on residents’ payment history to put arrears cases into different categories in order to send tailored messaging.

South Holland and East Lindsey councils work together to handle council tax administration in their two areas. They use their shared council tax payment system to determine whether a resident’s non-payment is out of character, or part of a regular pattern.

For instance, staff will be alerted if they have never had to issue a reminder for a given property before. Staff are able to then adapt their subsequent correspondence accordingly in order to tailor their contact to the circumstances suggested by the resident’s behaviour.

In order to encourage payment by direct debit, some authorities have allowed payments in this way on each day of the month, to match the variety of days on which residents are paid. Authorities may also wish to consider adopting more sophisticated ‘nudge’ techniques, as discussed in the Local Government Association’s behavioural insight resource.

5. Effective use of data

Evidence shows that adapting interventions according to a debtor’s circumstances can lead to fairer treatment for residents and faster, more sustainable debt recovery for authorities.

Some authorities already use intelligence-led models to assist with establishing the best option for collection. When residents miss an instalment, such authorities will segment cases according to what the most appropriate next steps are, and seek to establish why a resident may have fallen into arrears.

Authorities already hold a wealth of evidence which can help them understand a debtor’s profile. This includes their historic payment behaviour, any existing entitlement to council tax support or other council tax discounts, the use of local authority services, and records of any known vulnerabilities, including severe mental impairment.

Utilising these data points can help authorities make more suitable choices on how best to engage with residents and what recovery methods to use. It can also lead to identification of eligibility for additional support, exemptions and discounts that could help to prevent further arrears.

In some cases, when the authority believes that a resident may be in a financial position to pay, their engagement will highlight that council tax is a priority debt, and set out the consequences of non-payment. In the case of residents known to be in financial difficulty or vulnerability, they will use more personalised and resource-intensive intervention, often with the help of local debt advisors, to encourage engagement, signpost support and establish a sustainable repayment solution.

Rutland Council make use of the extensive data that they have available in their council tax administration system to assist them in making targeted choices about engagement, repayment plans and further enforcement actions.

For instance, the council use records of past interactions or conversations with the resident and check for evidence of moving home or other changes of circumstances. If appropriate, the council will perform a credit reference check to look for indications of propensity to pay.

Several authorities have partnered with external organisations so that they can work together to make effective use of the authority’s own data to aid collection.

The London Borough of Barking and Dagenham has worked with Policy in Practice to combine household-level datasets to assess residents’ financial capability. This has allowed the council to take a broader holistic view of a residents’ debts, and identify struggling households in order to offer tailored support.

In depth analysis of household-level data also helps the council to track outcomes and determine what would be the most effective course of action to take for similar scenarios. When this holistic approach to debt was brought in, the council saw a 10% reduction in the use of temporary accommodation over the year.

Similarly, some authorities have taken steps to ensure that council tax, parking, housing benefit overpayment and council rent arrears owed to the authority are administered on a single system. This allows the authority to gain a better understanding of the debtor’s position and the potential barriers to payment. It also provides the resident with a clearer sense of their liability.

In some cases, authorities have taken steps to consolidate debt and adjust repayment plans in light of a more holistic view of an individual’s circumstances in order to treat debtors more fairly.

6. Next steps when a resident misses an instalment

Where residents fail to respond to a bill, or miss an instalment, the authority will carefully consider the options available to them in their attempt to engage with the individual.

Where residents miss an instalment, councils can issue reminder notices, and where the account is not brought up to date within 7 days, the full year’s liability becomes due. However, before taking such steps, some authorities make use of ‘soft’ reminders to signpost the resident to the support that is available from the authority and debt advisors for those who may be struggling to pay their instalments.

Other authorities have identified certain cohorts of residents – such as those on local council tax support and in arrears – who they will contact by phone to try to prevent the need for further enforcement action, and the associated costs to the resident.

Where attempts to engage billpayers have not succeeded, authorities have the option of applying for a liability order. The order establishes the debt liability before authorities may progress to more formal recovery action. This provides the courts with an opportunity to confirm that the council tax debt is due, and that the resident in question is the person liable to pay the bill.

Many councils have revised the language that they use in communications with residents, ensuring that they are clear on the measures that the debtor could take to avoid further enforcement action. For instance, it can be made clear who to contact at the authority in order to put in place a repayment plan. Correspondence will often set out what the next steps taken by the authority will be and prominently highlight options for seeking debt advice.

Authorities and taxpayers may find it helpful for the bill to set out charges for the court summons and liability order with straightforward information about how they can be paid and how they will be collected if this doesn’t happen.

Some authorities make continued efforts to engage and support their residents alongside their application for a liability order. For instance, after a court summons is issued, some authorities offer an automatically generated repayment plan in order to try to avoid further enforcement action.

Some authorities have established ‘Summons clinics’ which are offered to residents when they receive the court summons and occur before the liability hearing. At the clinic, officers, billpayers and independent debt advisors are able to discuss possible repayment arrangements as well as deal with queries about council tax liability.

There can be benefits for residents from making use of affordability and vulnerability standards to make fair and consistent proposals for payment plans. Many authorities have developed their own income and expenditure forms to make appropriate assessments for affordability payments. Some also draw on externally developed models, such as the Standard Financial Statement.

These forms allow authorities to balance council tax recovery with the specific financial needs of each individual and consider longer repayment plans if appropriate. Authorities ensure that the plans are sustainable across the full payment period in order to assist in protecting the billpayer from medium – or longer-term – debt problems, recognising that council tax is an ongoing annual liability.

Tools for assessing affordability can be made easy to use and readily accessible. Some authorities publicise income and expenditure forms on their website and allow debtors to make repayment offers through an online payment portal at any stage.

Where local authorities seek a liability order, they are able to charge the reasonable costs incurred in obtaining the court summons and liability order, and add those costs to the council tax bill. Authorities will give thought to how they have calculated those reasonable costs.

In making an assessment of the costs, authorities should always bear in mind that the costs will be borne by residents already having difficulties paying their bill, and those costs should be kept as low as possible. Some authorities have chosen not to charge certain groups of residents the fee, for example those in receipt of council tax support. A number of authorities make clear to residents that they are prepared to waive the fee in cases where a repayment agreement is made and kept to.

As well as waiving liability order fees, some authorities are using their discretion to adjust the level of fees for different circumstances. For instance, Dudley Council charges a much-reduced fee of £12.50 in the case of liability order applications for debts that are below £95.

7. Making effective use of enforcement action

Authorities have a range of options open to them when they decide to take further action following a missed instalment. Depending on the specific circumstances, making an attachment of earnings or a deduction from benefits can be an effective way for residents who fall into arrears to repay debt over a sustainable period. Where possible, authorities often seek to use these options before taking other action, such as referring a case to enforcement agents.

Wherever possible, attachments should only be made after reviewing an individual’s total debts and other ongoing commitments such as utility bills, mortgages or rent and support of dependents. Authorities are often particularly cautious about applying two attachments of earnings to residents known to be in positions of vulnerability. Some authorities also test an individual’s propensity to pay by conducting a credit score test, in order to inform their choice of action.

Engagement with residents is strengthened when authorities explain the basis, effect and timeline of any attachments. This includes keeping the resident informed of any changes to the level of deductions that are being made. Where the resident is receiving debt advice, some authorities will communicate their plans to the advisor.

Many authorities take steps to make clear to the resident of any grounds available to them to review the attachment, should their financial circumstances change, and inform the resident how to contact the authority in such an event.

In recognition of the advantages available in data-sharing to enhance the identification of debtor vulnerability and the local authority application of attachment of earnings for council tax debt, last year 29 local authorities participated in a data sharing pilot with HM Revenue and Customs (HMRC) using the data sharing powers introduced by the Digital Economy Act 2017.

Following the success of this pilot, a second pilot has been launched in June 2021 between over 40 local authorities, HMRC and the Department for Work and Pensions (DWP) to strengthen the capacity of local authorities in this area. Following the conclusion of this second pilot, the outcomes gained shall be reviewed in consideration of widening the data sharing gateway nationally.

Effective use of enforcement agents can also be an important way of recovering council tax debt where the authority is satisfied that there are no other appropriate mechanisms for recovering that debt. When collecting unpaid council tax, enforcement agents are working on behalf of the local authority. It is the authority’s responsibility to ensure that agents work within the guidelines set by the authority and that they comply with the regulatory framework and the national standards.

It is crucial that, where authorities use enforcement agents, they do so effectively and considerately, recognising that the use of enforcement agents will add further cost to the resident’s bill. This includes taking prior steps before referring a case to agents.

Residents will benefit from ensuring that there is clear communication between authorities and enforcement agents working on their behalf. When a case is referred to an agent, it is important that the taxpayer is made aware that collection of the debt will be taken forward by the named enforcement agent. This will include signposting to the relevant contact details for the council and the agent, or clarify that future communication should be with the agent directly. This will inform the taxpayer of who to contact to discuss repayment, and ensure that the case can be resolved quickly and effectively.

To ensure efficient recovery when cases are referred to enforcement agents, authorities should have robust contracts with enforcement agents that includes common standards for assessing vulnerability. Enforcement agents can play an important role in identifying potential vulnerabilities where previous efforts to engage with a resident have not succeeded. Agents should be able to quickly provide the authority with information that can be used to tailor subsequent action. Such information will also allow the authority to determine whether the resident is eligible for any benefits, discounts or exemptions that are not being claimed.

Many authorities require the enforcement agencies they work with to refer cases back to the authority whenever vulnerability is discovered. In Liverpool, if an agent identifies factors which could indicate vulnerability, such as older age or pregnancy, the case must be closed and returned to the council due to the higher likelihood that it involves a vulnerable individual.

The council will then profile the account to determine what steps to take and follow up to ensure that the resident is aware of the debt advice that is available. The council will also check whether its own Breathing Space scheme would be appropriate to support the resident as they discuss a repayment plan.

Some authorities have chosen not to refer cases involving certain groups of people to enforcement agents. For instance, these authorities do not use this method of debt recovery in cases of council tax support claimants, those with an Severe Mental Impairment discount or those with caring responsibilities. Similarly, some authorities have instituted a minimum council tax debt level, below which they do not engage enforcement agents. This is to ensure that residents are not charged further enforcement fees for what may be a small amount of arrears.

Authorities may wish to go further by learning from softer enforcement measures developed by some other councils. In some areas, authorities have a hardship caseworker who engages with those in arrears and aims to build relationships between the resident and the authority. This allows individual cases to be looked at holistically, so that other debts, rent arrears and maximisation of benefits can be considered, while statutory enforcement fees are avoided. In these areas, there is sometimes a mixed approach, where enforcement agents are used in cases involving persistent non-payers, and internal officers work on cases involving council tax support cases or vulnerability.

Southend-on-Sea Council has invested in a dedicated hardship caseworker, whose efforts have led to an improvement in the council tax collection rate. Collection agents use knowledge of the local area to build relationships with residents and work across several areas of the council in order to develop support mechanisms for struggling households.

In Southend-on-Sea, drop-in sessions are organised to inform residents of their options. In this way, an opportunity is created to have a single team that can take a holistic view of the various debts that could be owed to the council by a resident.

8. Further resources

• Citizens Advice and the Local Government Association – Council tax protocol
• Local Government Association’s Behavioural Insights Team – Supporting councils to improve revenue collection with behavioural insights
• Ministry of Housing, Communities and Local Government – Paying the right level of council tax: a plain English guide to council tax
• Ministry of Justice – Bailiffs and enforcement agents: national standards
• Money and Pensions Service – Money Navigator tool
• Money and Pensions Service – Standard Financial Statement