Council Tax & DRO: Can It Clear Your Arrears?

Can a Debt Relief Order clear council tax arrears?

Yes — council tax arrears are classed as a qualifying debt for a Debt Relief Order (DRO) in England and Wales. That means if a DRO is granted and completes successfully, any council tax debt included in the order is written off at the end of the 12-month moratorium period, according to GOV.UK.

This is one of the most common reasons people look into a DRO. Council tax is a priority debt, and councils can escalate enforcement quickly — but once a DRO is approved, the council generally cannot continue chasing the included arrears or instruct bailiffs for them.

What changed in June 2024

The DRO rules were updated on 28 June 2024, making the scheme accessible to significantly more people with council tax problems:

• The total debt limit rose from £30,000 to £50,000
• The £90 application fee was scrapped — DROs are now free to apply for
• The maximum value of a single vehicle you can own rose from £2,000 to £4,000

According to the Insolvency Service, these changes were designed to expand access to around 100,000 more people across England and Wales who were previously locked out by the debt cap or the application fee.

Who qualifies for a DRO

The eligibility criteria set out on GOV.UK state that to apply for a DRO you must:

• Owe less than £50,000 in total qualifying debts
• Have less than £75 per month in surplus income after reasonable living expenses
• Own assets worth less than £2,000 in total (excluding one 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
• Not be currently in another formal insolvency procedure

Anyone considering a DRO must apply through an authorised intermediary — usually a debt adviser at a free-sector charity. You cannot apply directly to the Insolvency Service yourself.

How a DRO affects council tax debt specifically

The current year's bill is treated differently

Only council tax that has fallen into arrears before the DRO is approved can be included. The current year's ongoing liability — bills you haven't yet missed — is not written off. You'll still need to pay future instalments as they fall due.

Bailiff action stops on included debts

Once the DRO is approved, the council and any enforcement agents acting for them must stop collection activity on the arrears included in the order. According to GOV.UK, creditors listed on a DRO cannot take further action to recover those debts during the 12-month moratorium.

Liability orders don't block a DRO

A common worry is that because the council has already obtained a liability order in the magistrates' court, the debt can't be included. This isn't the case — liability order debts are still qualifying debts for DRO purposes.

Debts that cannot be included

Some debts are excluded from a DRO and continue to be owed even after the order completes. According to the Insolvency Service these include:

• Court fines and confiscation orders
• Child maintenance and Child Support Agency arrears
• Student loans
• Debts from fraud
• TV licence arrears in some circumstances

Council tax arrears are not on this excluded list — they are qualifying debts.

What happens after the 12-month period

If the DRO runs its full course without being revoked, the qualifying debts listed — including council tax arrears — are written off at the end of the moratorium. The DRO stays on your credit file for six years from the date it was approved, and it remains on the public Individual Insolvency Register while it is active.

A DRO is a serious step with long-term consequences for credit, certain jobs, and acting as a company director. It's information only — whether a DRO is the right route for any individual depends on their specific circumstances and should be assessed by a qualified debt adviser.

Alternatives to consider

A DRO isn't the only route for council tax arrears. Depending on the situation, other options include:

• Agreeing a repayment arrangement directly with the council
• Applying for Council Tax Reduction or hardship support from the local authority
• A Debt Management Plan (DMP) covering multiple debts
• An Individual Voluntary Arrangement (IVA) for higher debt levels
• Bankruptcy for debts above the DRO threshold

Each has different costs, consequences and eligibility rules. A regulated debt adviser can explain which routes you may qualify for.