Modernising and improving the administration of council tax

Taxpayers rightly expect and deserve a fair and reasonable local tax system, with their hard-earned taxes being invested in well-run local daily services that they can rely on. Council tax plays an essential role funding local government, the foundation of a functioning state.

We know that the demand for, and the cost of services has increased significantly – and that this has made the job for councils in recent years much harder. After a decade of cuts and fiscal mismanagement inflicted by the last government, compounded by spiralling inflation and a failure to grow our economy, councils of all political stripes found themselves in crisis. Our fiscal inheritance means that there will be tough choices on all sides to get us back on the path to recovery. It will take time, but we are getting on with the job.

This government has already acted quickly to stabilise councils, investing a further £5bn into local government in 2025-26, supporting a total increase in Core Spending Power of 6.8%, including an injection of support through a new £600m Recovery Grant, offering targeted support for councils with lower tax bases and higher levels of deprivation. The impact of these measures is clear; no council was forced to issue a S114 notice as a result of financial distress, and claims against the Exceptional Financial Support scheme were £1bn less than the previous year. We also kickstarted the recovery of local audit, addressing the unacceptable backlog of over 900 sets of accounts which had built up under the previous government. With leadership and investment 95% of accounts were successfully submitted by the backstop date put in place, but there is still much more to do to build an early warning system and oversight regime which is fit for the future.

Whilst council tax is a significant portion of local government funding, grant from central government is also critical to enabling the sector to deliver. At the 2025 Spending Review, the government committed a further £3.4bn of grant funding to local government over the Spending Review period (2026-27 to 2028-29). When taken together with a 3% core council tax referendum principle and 2% adult social care precept, this provides an average overall real terms increase in local authorities core spending power of 2.6% over the period.

Moving forward the government is committed to providing a multi-year funding settlement starting in 2026-27, the first in over a decade. We are also acting to place councils on a firmer footing in the long term, with deep changes to the way we assess need and resources, and how we allocate funding across the system. It is not fair that overlooked and deprived places are punished by the funding system, and we are determined to create a fairer system across the country.

Local taxes help pay for essential local services which people rely on, and so it is right that deliberate tax avoidance is not tolerated; by the same token, the government is well-aware of the real financial pressures still felt by households, and that there are examples of aggressive collection practices inflicting misery on residents across England. We believe there are clear opportunities to modernise the administration of the council tax system and deliver a fairer and more efficient, system for taxpayers and local authorities. We believe we can be both firm on deliberate tax avoidance, and fair to those needing support with a common-sense approach that strikes the right balance. We know these issues are complex, and we are ready to make difficult decisions where they are the right decisions. That is why we are launching this consultation on the administration of council tax.

We will make rapid progress in improving the experience of council tax for bill payers. This includes action to end unacceptable, aggressive collection practices that have seen vulnerable people who miss payments rapidly subjected to lump sum payments and liability orders, which can lead to bailiffs being sent in, without the offer of a payment plan or a welfare check. These practices do not benefit councils, who can incur costs seeking punitive measures without recovering the tax in question, or residents. This government will deliver on a fairer and more efficient system for taxpayers and councils, and which enables councils to fund vital public services.

Jim McMahon OBE MP, Minister of State for Local Government and English Devolution.

20 June 2025