Council Tax & DROs: Can a Debt Relief Order Help?

Council tax arrears are one of the most common debts written off through a Debt Relief Order (DRO), and the rules changed significantly in 2024. The £90 application fee was scrapped in April 2024, and from June 2024 the total debt limit rose from £30,000 to £50,000 — meaning many people who previously couldn't qualify for a DRO now may be able to.

Can council tax debt be included in a DRO?

Yes. According to GOV.UK, council tax arrears are classed as a qualifying debt for a Debt Relief Order. This means that if your DRO is approved, you no longer have to pay the council tax debt covered by the order, and the council cannot pursue you for it during the 12-month moratorium period.

If the DRO is not revoked at the end of the 12 months, the qualifying debts listed in it — including council tax arrears — are written off.

Who qualifies for a DRO in 2026?

The Insolvency Service sets out the eligibility criteria. To apply for a DRO you must:

• Owe £50,000 or less in qualifying debts (limit raised from £30,000 in June 2024)
• Have less than £75 per month in surplus income after reasonable household expenses
• Own assets worth £2,000 or less (excluding a vehicle worth up to £4,000)
• Have lived, worked or had a business in England or Wales in the last three years
• Not have had a DRO in the previous six years

If your council tax debt alone or combined with other debts pushes you over £50,000, a DRO is not an option and other routes — such as an IVA or bankruptcy — would need to be considered through proper debt advice.

What happens to ongoing council tax during a DRO?

A DRO only covers debts that exist on the date the order is approved. Council tax that becomes due after the DRO is made is a new liability and must be paid as normal. This is an important distinction — the DRO clears arrears but does not exempt you from future council tax bills.

If you're worried about affording ongoing council tax, you may be able to apply to your local council for Council Tax Reduction or a discretionary discount. Eligibility depends on your local authority and circumstances.

What about the liability order?

If your council has already obtained a liability order in the magistrates' court for unpaid council tax, the underlying debt can still be included in a DRO. Once the DRO is approved, the council and any enforcement agents (bailiffs) instructed by them must stop collection activity on that debt for the duration of the moratorium.

How to apply

You cannot apply for a DRO directly. Applications must be submitted through an authorised intermediary — typically a debt adviser at an approved organisation such as StepChange, Citizens Advice or National Debtline. The application is then sent to the Official Receiver at the Insolvency Service for approval.

Since April 2024, there is no application fee. Previously this was £90.

DRO vs other options for council tax debt

A DRO is not the only formal option. Depending on circumstances, some people consider:

• An Individual Voluntary Arrangement (IVA) — a formal agreement to pay creditors over a fixed term, usually five or six years
• Bankruptcy — appropriate where debts exceed DRO limits or where assets are involved
• A Debt Management Plan (DMP) — an informal arrangement to repay debts at an affordable rate
• Council Tax Reduction or hardship payments from the local authority

Each route has different consequences for credit files, assets and ongoing payments. Free debt advice from an authorised intermediary is the proper way to compare them against your specific situation.

Recap: the key 2024 changes

• DRO debt limit raised to £50,000 (from £30,000) — June 2024
• Vehicle exemption raised to £4,000 (from £2,000) — June 2024
• £90 application fee abolished — April 2024
• Council tax arrears remain a qualifying debt