We explain the difference between priority and non-priority bills and what types of bills fall under each category.
So, what are priority bills? You may have heard of them when searching the internet for finance or debt advice. As the name suggests, priority bills are the most important bills to pay. This is because there are serious consequences involved by not paying them. More information on this below.
We have created a list of priority and non-priority debts to help you to see the difference.
Priority bills (for England and Wales) include the following - in no particular order:
- Secured loans
- Hire purchase or logbook loans
- County Court Judgement (CCJ)
- Council tax
- TV licence
- Magistrate court fines
- Gas and electricity bills
- Current telephone bills
- Tax, VAT and National Insurance
- Child maintenance
Non-priority bills include:
- Water (cannot be disconnected by law)
- Credit cards
- Unsecured loans including payday loans
- Store cards
- Overpayments of benefits - apart from tax credits
- Unpaid parking tickets - these are called Penalty Charge Notices or Parking Charge Notices
- Money owed to family or friends
It’s important to recognise that there are still consequences for not paying non-priority bills. For instance, if you miss or make reduced payments on any debt for three months or more, your creditors can lodge a default on your credit file.
This can potentially have a negative impact on your credit score and your ability to obtain credit in the future. Creditors could also take out a County Court Judgement (CCJ) against you for non-payment, which lasts on your credit file for 6 years.
So it’s best to budget for all of your outgoings each month, not just the priority bills. For help with this, take a look at the budgeting tool provided by the Citizens Advice bureau.
Now let's take a look at priority debts in more detail.
Mortgage and rent
If mortgage repayments aren’t maintained on time, every time, your home could be at risk of repossession. Mortgage providers can request possession orders from the court to sell properties to recover their losses. However this is usually a last resort, as the housing charity Shelter explains that mortgage lenders have to follow certain rules before they can apply for court action.
If you cannot afford repayments, urgently contact your mortgage company to discuss your circumstances with them. If you are a tenant and your landlord breaks their mortgage agreement, it can put you at risk of eviction. The Shelter website also has advice on how to delay eviction if you are in this situation.
A secured loan is money you borrow that is ‘secured’ against your property. This means the asset can be used to recover the debt if you fail to meet the repayments on time, every time. For more information on secured loans and how they work, check out our ‘5 questions on secured loans’ article.
Hire purchase or logbook loan
If you have a car (or other goods) on hire purchase, you don’t own it until you make the final payment. So if you fall behind, the lender is within their rights to repossess the car and sell it to recoup lost funds. Any debt remaining after the sale is payable, plus any court fees.
Please note, if you cannot afford the hire purchase agreement anymore, you can voluntarily return the goods yourself before the contract ends. If you have paid over half of the total price of the goods, then you won’t usually have to pay any more towards it. Check the terms and conditions of your original contract, for more details.
Similarly, with logbook loans, your vehicle could be repossessed if you don't maintain payments, as you are passing over ownership of the asset to the lender until the loan is repaid.
A CCJ can only be taken against you if your debt has defaulted (after three or more missed or late payments). If you receive a CCJ and then fail to meet the repayments, the creditor can take further court action, such as:
- Send bailiffs to your property
- Lodge a charging order against your home. This means the creditor would be repaid if and when the house is sold or remortgaged
- They could make an attachment of earnings, where repayments automatically come out of your wages before you get paid
Remember, if you are facing further legal action, you can get free, non-judgemental advice from debt charities such as Citizens Advice or StepChange.
If you are struggling with paying your council tax it’s worth getting debt advice and contacting your council to advise them of your situation, to see if you can come to an arrangement.
If you miss a payment, a reminder letter will be issued after 14 days. But if it's paid within 7 days of this letter, you can continue to make your standard monthly payments as normal. However if it goes beyond this timeframe, the council can request repayment for the total remaining balance, and ultimately they can take court action to claim back the arrears if need be.
Councils and local authorities in England have different options available to recover the debt, including:
- Send bailiffs to your property.
- Make an attachment of earnings directly from your wages.
- Deductions can also be made from benefit payments.
- Secure a charging order against your property if you owe more than £1,000 and they already have a CCJ against you. They could potentially make you bankrupt if you owe more than £5,000.
- As a last resort, they could send you to prison for up to three months, if other options have been exhausted.
It’s illegal to watch television without a TV licence in the UK. If you don’t pay a licence fee, then you could have your wages or benefits deducted. Bailiff action could be taken against you. A fine up to £1,000 plus court costs could be added on top of the arrears.
Magistrate court fines
These types of fines can include unpaid TV licences and other criminal offences like anti-social behaviour. Failure to pay fines, can lead to:
- Deductions from benefits
- Attachment of earnings from your wages
- Bailiff action
- A charging order secured on your property
- An increase in the fine
- Community service
If you cannot pay your fine, there is the option to write to the fines officer at the court to ask if your payments can be reduced, before they start deducting a fixed amount from wages or benefits.
Gas and electricity bills
According to Ofgem (June 2019), approximately one million gas and electricity customers owe money to their suppliers. In the worst case scenario, these companies could cut off the supply to customers who owe them money if other options to claim back funds have failed.
But all is not lost, as Which explains that if you get in touch with your energy provider, they should be willing to take your individual circumstances into account if you cannot afford the bill. They may be able to put a suitable payment arrangement in place for you, such as paying by direct debit installments for example.
Please note that paying a reduced sum can affect your credit score, as creditors can apply default on your credit file if you miss or make reduced payments for three months or more.
Similarity, if you cannot afford to repay your landline or mobile phone bills you could risk being cut off by your provider, which means you won’t be able to make or receive calls or texts. So it could be worth giving them a call to explain your financial circumstances to try and prevent this from happening if you cannot afford the repayments.
Tax, VAT and National Insurance
HMRC can take a variety of steps if you don’t pay your taxes, including:
- Deduction of wages or pension
- Pass your debt to a collections agency
- Sell your goods to pay your debts
- Take money directly from your bank or building society account
- Take court action
- Make you bankrupt or shut down your business
If you don’t agree with a tax bill you’ve received, you can get in touch with them to dispute it.
If you are self-employed, MoneySavingExpert has the lowdown on filing self-assessment tax returns. For more help, visit the Government website which provides handy videos to show you how to fill in the forms.
Non-payment of child maintenance can lead to:
- Wage deductions
- Benefits deductions
- Money taken directly from your bank or building society account
- Bailiff action
- Disqualification from driving
It is best to contact your ex-partner and The Child Support Agency (CSA) or Child Maintenance Service (CMS) if you cannot afford to make child maintenance payments so that they can work with you to help you clear your arrears.
Create a budget to make sure all of your priority bills are covered, before spreading out your remaining funds fairly between your non-priority debts.
If you are struggling financially, it is best to contact your provider to see if they can come to an affordable arrangement. And again, you can also get free debt advice from the likes of Citizens Advice and StepChange.
Please note that creditors can add a default to your credit file if you miss or make reduced payments for three months or more, which could affect your ability to get credit in the future. Think about setting up direct debits or standing orders so you don’t miss payments.
Check out our article giving tips on how to check your credit score for free.
Disclaimer: All information and links are correct at the time of publishing.
By Adele Kitchen
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