Updated Council Tax Arrears and Breathing Space Rules

Dealing with council tax debt may feel scary. But don’t worry; you’ve come to the right place for answers. This article is going to help you understand:

• What the Debt Respite Scheme is and how it can help you.
• What steps to take if you can’t pay your council tax.
• The duration of the “Breathing Space” scheme.
• Who can use the “Breathing Space” scheme.
• What happens if you don’t deal with council tax debts.

We know that you might be feeling worried. Not being able to pay your council tax can feel very hard, but remember, you’re not alone in this. Each month, over 170,000 people visit our website for advice on dealing with debt.

We hope that this article can put you at ease and give you the facts to help you understand your options. Let’s dive right in.

What is the Debt Respite Scheme?

The Debt Respite Scheme is a government scheme introduced in early 2021 to help debtors make plans to get out of debt. 

If you qualify for the scheme, applicable creditors won’t be able to:

1. Add interest to the debt
2. Add charges to the debt
3. Take further action to recover the debt, such as applying for a court order

During the breathing space, it’s your job to seek debt advice and arrange a suitable debt solution to get out of debt. 

How long does the breathing space scheme last?

The Debt Respite Scheme lasts for 60 days but it can be terminated if you don’t use the breathing space for the purpose of seeking debt advice and arranging a debt solution. 

Your debt adviser will review the breathing space scheme and how you’re using it at some time between the 25th and 35th day. If you’re using the scheme for some respite but without making arrangements to get out of debt, it will be terminated. 

Who qualifies for the breathing space scheme?

To qualify for the Debt Respite Scheme you must be a debtor who lives in England or Wales and hasn’t used the same scheme within the last year. 

We discuss comparable options for people in Scotland and Northern Ireland at the end of this guide. 

There are some other things that can stop you from using a Debt Respite Scheme, such as if you’re already using a Debt Relief Order (DRO) or Individual Voluntary Arrangement (IVA).

Not all debts qualify for breathing space under the Debt Respite Scheme. 

» TAKE ACTION NOW: Fill out the short debt form

Is council tax included in breathing space?

Council tax arrears can be included in the Debt Respite Scheme, but future council tax payments cannot.

This means you can use the breathing space scheme to buy time on working out how to deal with your missed council tax payments, but it cannot be used to get breathing space on any future council tax payments that will be owed.  

Scores of people end up in coucnil tax arrears and need quick advice, just like the forum user below:

Source: https://forums.moneysavingexpert.com/discussion/5673191/council-tax-debt 

This debtor and many others might benefit from the breathing space scheme.

Thousands have already tackled their debt

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What debts are covered by breathing space?

The most common debts that are covered within the Debt Respite Scheme are:

1. Personal loans and credit card arrears
2. Store cards arrears
3. Car finance arrears
4. Rent and mortgage arrears
5. Council tax arrears
6. Utility arrears

Can rent arrears be included in breathing space?

Yes, the breathing space scheme can help you deal with rent and mortgage arrears. 

But you’ll still be obligated to make any future rent or mortgage payments during the breathing space scheme. 

Do all debts have to be included in breathing space?

Yes, you’re not allowed to exclude any qualifying debts from an application to use the Debt Respite Scheme.

How do I apply for the Breathing Space Scheme?

To apply for the Breathing Space Scheme, you need to talk to a debt advisor. They will be able to look at your financial situation and see if it is appropriate for you.

If they think that you will benefit from the scheme, they will submit an application on your behalf.

You can find a debt advisor by using the MoneyHelper website. Keep in mind that if you are receiving mental health treatment you can nominate someone else to contact a debt advisor for you.

Are there Breathing Space Schemes in Scotland and Northern Ireland?

There are similar breathing space schemes in Scotland, namely creditor forbearance or a moratorium period. 

Unfortunately, at the time of writing, there is no equivalent breathing space scheme available for debtors in Northern Ireland. But Irish debtors can still get efficient support by speaking to a debt charity. 

Are there other options?

If you don’t think that the Breathing Space Scheme is right for you, you might want to consider a debt solution.

There are several different debt solutions available in the UK, so I recommend speaking to a debt charity as soon as possible. Their advisors will be able to look at your finances in detail and help you work out which debt solution will work best for you.

I have linked a few charities that offer these advisory services for free below.

Debt Management Plan (DMP)

A DMP is an informal debt solution that lets you pay off your debts via a single monthly payment.

Because it is informal, it is not legally binding so you are not tied into a DMP for a minimum number of payments.

Individual Voluntary Arrangement (IVA)

An IVA is a formal agreement between you and your creditors. You agree to pay a monthly sum that is distributed amongst your debts, and your creditors agree not to contact you during your IVA.

IVAs typically last for 5 or 6 years, and any outstanding debt is wiped off when it ends.

Keep in mind that IVAs are not suitable for everyone. You need to owe several thousand pounds to more than one creditor to be eligible. You also need to demonstrate that you have some disposable income every month.

Trust Deed

IVAs are not available in Scotland. Instead, you will need to opt for a Trust Deed.

Trust Deeds work in the same way as an IVA – you pay an agreed sum each month that is shared amongst your creditors, they can’t contact you, and any leftover debt at the end of your Trust Deed term is written off.

Debt Relief Order (DRO)

A DRO is a good option for those facing financial hardship with no assets and little income.

For 12 months, you make no payments, but your creditors freeze your interest and don’t contact you.

If your finances haven’t improved during this year, you may be able to write off your unsecured debts.

Bankruptcy

If you have debts but no realistic possibility of ever paying them off, you may need to declare bankruptcy.

Bankruptcy has an unfair stigma attached to it as it may be your only way of getting a financial fresh start. That said, it is a serious financial situation that should not be taken lightly.

Sequestration

Sequestration is the Scottish version of bankruptcy.

If you have little income and no valuable assets, you may be able to apply for a minimal asset process bankruptcy (MAP). A MAP is a quicker, cheaper, and more straightforward version of sequestration, so worth considering.