Things may be getting a bit better for debtors in 2026
By Mr Bankruptcy
8th January 2026
The narrative around debt for the past year has all been doom and gloom; a cost-of-living crisis, rising interest rates, job insecurity, all added to by the expectations of the Christmas season.
For anyone facing an unmanageable debt problem, things seem dark. However, I’m going to lay aside my seasonal Scrooge act and suggest that the Ghost of Christmas Past hasn’t been all bad – and the future may yet be brighter.
Positive changes for people in debt?
The overall picture of personal debt remained a big concern in the UK, but 2025 did bring some cautiously notable relief. This came in the form of some policy and legal changes designed to alleviate the pressure on some of the most vulnerable people, and to strengthen overall resilience for everyone.
Is the cost-of-living crisis easing?
I know it didn’t go down well with commentators, but the Government did introduce a number of measures in its Autumn Budget that might make things a little easier for hard-pressed people trying to reduce their debt.
- Energy bills. Changes to the Renewables Obligation and Energy Company Obligation could reduce average household energy bills by around £150 annually from April 2026 according to the Treasury. This promises a direct saving on a core household expense.
- Transport. On some of the more expensive routes, a one-year freeze on regulated rail fares (the first in 30 years) is expected to save some commuters more than £300 per year.
- Health. Another freeze, on prescription charges, also offers small but important relief for anyone trying to manage a health condition.
- Welfare. Controversial in many quarters, scrapping the two-child limit for Universal Credit, will increase the household income for some families, helping them to meet essential living costs without resorting to borrowing.
Enhanced protections and fairer debt procedures
Beyond direct financial relief, the regulatory landscape has also changed, offering better support and fairer treatment for people already in debt.
- Fairer debt collection. New reforms to the enforcement sector were under consultation last year. These aim to protect financially vulnerable people. Plans include greater regulation and independent oversight of bailiff firms to reduce doorstep visits and ensure people have a better opportunity to settle debts at the earliest stage, saving them money further down the line.
- Improved insolvency protocols. The Insolvency Service introduced the IVA Protocol 2025 on April 1. This included important changes such as disregarding property equity of less than £10,000 in an Individual Voluntary Arrangement (IVA). This effectively means the family home will no longer form part of many IVAs, offering vital security for debtors. The protocol also allows for more flexibility to reduce monthly payments without immediate creditor approval, providing a much-needed breathing space to many.
- Vulnerable Renters. Advocacy groups like Shelter and Citizens Advice have continued pushing for targeted support for private renters, who are vulnerable to financial shocks. As a result, there is greater awareness of the need to restore the link between Local Housing Allowance and actual rent costs, with calls for a policy change gaining momentum.
- Regulation for Buy-Now, Pay-Later. New legislation was approved in July that requires lenders to carry out affordability checks to prevent consumers from taking on unmanageable debt.
- Council Tax arrears reform in Wales. From April 2026, the deadline to address missed council tax payments before enforcement action starts will be extended from one week to nine weeks, giving people more time to seek help and avoid worsening debt.
Greater national financial resilience
The Bank of England’s December 2025 Financial Stability Report noted that both UK household and corporate debt levels are low historically, despite higher global risk. It assesses the British banking system as strong and well-capitalized, able to support the economy even under severe stress scenarios.
And quoted mortgage rates have continued to decrease, with net mortgage approvals reaching a nine-month high in the first quarter of 2025. This indicates an increase in good credit supply to households.
While many individuals, households and businesses will still face debt challenges in 2026, the past year did see some significant policy and procedural changes, as well as signs of economic stability. This suggests to me a glimmer of light on the horizon for people with problem debt, and for businesses and households feeling the squeeze.
James Rosa Associates
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