Millions of households across Britain could be hit with unexpected council tax bills next year due to a significant shake-up in how HMRC shares data with local authorities. The changes, set to take effect in 2025, threaten to create a perfect storm for families already struggling with the ongoing cost of living crisis.
What's Changing in the HMRC System?
The transformation centres around HMRC's move to a new digital platform for managing tax credits. While designed to streamline processes, this shift will fundamentally alter how real-time earnings data is shared with local councils.
Currently, councils automatically receive updates about residents' Universal Credit and tax credit status, allowing them to adjust council tax support accordingly. The new system requires manual updates, creating potential gaps where support continues despite increased earnings.
The Financial Fallout for Households
Experts warn this could lead to two significant problems for households:
- Unexpected backdated bills: Families might receive demands for hundreds of pounds in council tax they believed was covered by support
- Payment disruptions: Changes in circumstances could take weeks to process, leaving people unsure about their actual council tax liability
Who's Most at Risk?
The changes particularly affect those whose income fluctuates throughout the year, including:
- Seasonal workers
- Zero-hours contract employees
- People with irregular overtime patterns
- Those moving between benefits and work
"This could create a nightmare scenario for people already budgeting carefully," warns a local government insider. "The delay in data sharing means many won't realise they owe money until they receive a substantial bill."
Protecting Yourself from Surprise Bills
With the changes looming, households are advised to:
- Proactively inform their local council about any income changes
- Set aside emergency funds for potential backdated bills
- Regularly check their council tax account online
- Seek advice from Citizens Advice if concerned about affordability
The timing couldn't be worse for many families, coming amid continued pressure on household budgets from energy costs, food inflation, and mortgage payments. The government faces calls to ensure vulnerable households aren't pushed into financial difficulty by the administrative changes.
