Correspondence

Council Tax information letter 4/2025: Consultation on council tax administration

Published 20 June 2025

Applies to England

To: Local authorities in England – For the attention of the Council Tax section

From: Local Taxation and Pensions Division, Ministry of Housing, Communities and Local Government (council.tax@communities.gov.uk)

Date: 20 June 2025

Dear Colleagues

The government announced in December 2024 at the Local Government Finance Settlement that it would be consulting on changes to council tax billing. The government recognises that the administration of council tax more broadly has not been reviewed in decades, and there are broader opportunities to deliver a fairer and more efficiency system for taxpayers and councils. This is we are today launching a consultation looking at modernising the administration of council tax. In parallel to this the government has also published the second phase of its consultation into reforming funding for local government.

Modernising and improving the administration of council tax

The consultation published today seeks views on a broad range of issues related to the administration of council tax. This includes:

Making changes to council tax bills

The government set out, during the local government finance settlement, its intention to move from 10 to 12 instalments by default, and improve the transparency of bills. These moves are intended to help households to better manage their finances and to improve the link between council tax and local services, as well as ensure eligible households can access support.

Modernising support in the system

The government recognises many of the disregards in the council tax system have not been reviewed in decades. The government is proposing changing the title and definition of the Severe Mental Impairment disregard which it considers to be outdated and alienating for households and options to improve access to support. The consultation also seeks views on disregards for care workers and apprentices and how they can be improved.

Removing barriers to efficiency

The government recognises the range of innovative methods by which councils have made their processes more efficient. The government wants to understand what barriers there may be to councils being able to provide council tax communications even more efficiently.

Improving the collection and enforcement of council tax

The government recognises the necessity of councils having a range of tools available to collect the council tax they are owed and to tackle cases of avoidance. However, it is important that the action taken is proportional and sympathetic to those in hardship. The consultation proposes amending the time before councils make request a full-year’s bill or seek a liability order. It also proposes capping the cost of liability orders which can be charged on households. The government will consider issuing renewed guidance on these matters, subject to responses from this consultation. It will work in collaboration with councils to develop any such guidance.

You will note the consultation does not seek views on the actions of enforcement agents/bailiffs. The Ministry of Justice is separately consulting on regulating the sector. That consultation is available here.

The government believes it is vital in considering any change that we strike a balance between delivering a fair system for taxpayers and giving councils the necessary tools to collect council tax to deliver vital public services.

Fair Funding Review 2.0

We took our first steps to reform local government funding through the Local Government Finance Settlement 2025-26. We are also today publishing a consultation on the next stage of our plans, known as the Fair Funding Review 2.0. This follows the government’s consultation on the principles and objectives of local authority funding reform in December, which we have provided a summary of responses to here. This consultation marks the next step in introducing a fairer funding system that targets money where it is most needed, in partnership with local government. We will do this through the first multi-year Settlement in over a decade.

Our up-to-date approach will use the best available evidence to take account of the different needs and costs faced by local authorities in urban and rural areas, and the ability of individual local authorities to raise council tax. The consultation also builds on proposals to reset the business rates retention system, and proposals to move away from restrictive grants with burdensome reporting requirements.

Should you have any queries, please contact the Ministry at: council.tax@communities.gov.uk.