Updated for 2026

Cost of Living Crisis and Debt: A UK Guide for 2026

The cost of living crisis has become one of the defining financial challenges for UK households. Rising prices for food, energy, housing and everyday essentials have squeezed budgets across the country, leaving millions of people struggling to keep up with their bills. If you are finding it harder to make ends meet, you are not alone. This guide explains how the cost of living crisis is connected to growing personal debt, what signs to watch for, and what practical steps you can take to regain control of your finances.

How the Cost of Living Crisis Is Driving Debt Across the UK

Between 2022 and 2026, the cost of everyday goods and services in the UK has risen sharply. According to the Office for National Statistics, consumer prices remain significantly higher than pre-pandemic levels, even as headline inflation has eased from its 2023 peak. The problem is that wages have not kept pace. For many households, the gap between income and outgoings has widened to the point where borrowing becomes the only way to cover basic costs.

Credit card debt, overdraft usage and buy now pay later borrowing have all increased during this period. StepChange reported record numbers of people contacting them for debt advice during 2025, and that trend has continued into 2026. When you are using credit just to pay for groceries or utility bills, the debt can build quickly and become very difficult to manage on your own.

The cost of living crisis has also made it harder for people who were already carrying debt. Higher interest rates on loans and credit cards mean that existing balances grow faster, while the money available each month to pay them off shrinks. It creates a cycle that is tough to break without the right support.

Which Household Bills Are Causing the Most Financial Pressure?

Several areas of household spending have been particularly affected by the cost of living crisis:

• Energy bills remain well above their 2021 levels. Even with the energy price cap adjustments, a typical household still pays considerably more for gas and electricity than it did before the crisis began. You can check current rates through the Ofgem price cap page.
• Food prices have increased by over 25% since 2021 according to ONS data. While the rate of increase has slowed, prices have not come back down, so your weekly shop costs significantly more than it used to.
• Rent and mortgage costs have risen, driven by higher interest rates from the Bank of England. If you are on a variable rate mortgage or coming off a fixed deal, your monthly housing payment could have jumped by hundreds of pounds.
• Council tax continues to rise year on year. Many local authorities increased bills again in April 2026, adding further pressure to already stretched budgets.
• Cancelling direct debits might seem tempting when money is tight, but this can lead to larger problems including default charges and damaged credit ratings.

When several of these costs increase at the same time, the combined effect on your monthly budget can be severe. Many people find themselves choosing between paying one bill or another, which is a clear warning sign that debt is becoming unmanageable.

Signs the Cost of Living Crisis Is Affecting Your Finances

Debt problems rarely appear overnight. They tend to build gradually, and the cost of living crisis has accelerated that process for many people. Here are some common signs that your financial situation may need attention:

You are regularly using credit cards or overdrafts to cover day to day expenses like food or travel. You are only making minimum payments on existing debts. You have missed one or more bill payments in the last few months. You are receiving letters or calls from creditors chasing outstanding balances. You feel anxious or stressed about money on a regular basis.

If any of these sound familiar, it is important to act sooner rather than later. The longer debt goes unaddressed, the more it costs you in interest, charges and stress. There are practical steps you can take to start dealing with debt before it spirals further.

Free debt advice is available from organisations like MoneyHelper, which provides impartial guidance on managing debt and budgeting during the cost of living crisis.

Debt Solutions Available During the Cost of Living Crisis

If your debts have reached a point where you cannot realistically repay them from your current income, there are formal and informal solutions available. The right option depends on how much you owe, what assets you have, and what you can afford to pay each month.

Individual Voluntary Arrangement (IVA)

An IVA is a legally binding agreement between you and your creditors. You make affordable monthly payments over a set period, typically five or six years, and any remaining debt at the end is written off. Interest and charges are frozen once the IVA is approved. This can be a strong option if you have a regular income but cannot afford your current repayments. You can find out more about whether you qualify for an IVA on our dedicated page.

Debt Relief Order (DRO)

A DRO is designed for people with low income, few assets and debts under £50,000. It provides a 12 month moratorium during which creditors cannot chase you for payment. If your circumstances have not improved by the end, the debts are written off. The Insolvency Service provides official guidance on DRO eligibility.

Debt Management Plan (DMP)

A DMP is an informal arrangement where you make reduced payments to your creditors based on what you can genuinely afford. It is not legally binding, which means creditors do not have to accept it, but many will agree to reasonable proposals. A DMP can give you breathing space while the cost of living crisis continues.

Bankruptcy

For some people, bankruptcy may be the most appropriate route. It clears most of your debts, although it does come with significant consequences including the potential sale of assets and a lasting impact on your credit file. It is worth understanding all options before choosing this path.

If you are looking for a way to become debt free, speaking to a qualified adviser can help you compare these options side by side and find the one that fits your situation.

Where to Get Free Debt Help in the UK

You do not need to pay for debt advice. Several organisations offer free, confidential support to anyone struggling with debt during the cost of living crisis:

• StepChange: the UK’s largest free debt charity, offering advice online and by phone
• MoneyHelper: government-backed service providing tools and guidance for managing money
• Citizens Advice: free advice on debt, benefits and consumer rights
• The Insolvency Service: official government body handling formal insolvency procedures

If you would prefer to speak with someone directly about your options, Swift Debt Help can connect you with a specialist who will review your circumstances and explain what solutions are available. There is no obligation and the initial assessment is free. You can also read our guide on energy saving tips to help avoid debt for practical ways to reduce your outgoings right now.

Take the First Step Towards a Debt Free Future

The cost of living crisis does not have to define your financial future. If you are struggling with debt, there are solutions designed to help you regain control. Complete the short eligibility check below to see what options may be available to you.

Updated for 2026

Cost of Living Help in 2026: Your Guide to Managing Debt in the UK

If you are struggling with rising household costs, you are not alone. Cost of living help is something millions of people across the UK are actively searching for in 2026. Energy prices, rent, groceries, and council tax have all climbed sharply over recent years, leaving many families unable to cover basic expenses. When everyday costs outstrip your income, debt can build quickly, and knowing where to turn makes all the difference.

Why the Cost of Living Crisis Is Still Hitting Hard in 2026

The UK has faced sustained pressure on household budgets since 2022. Although inflation has eased from its peak of 11.1% in late 2022, prices have not fallen back to previous levels. The Office for National Statistics reported that average household expenditure on essentials rose by over 20% between 2021 and 2025. In 2026, the Ofgem energy price cap remains significantly higher than pre-crisis levels, and council tax bills have continued their upward trend across most local authorities.

For renters, the picture is equally tough. Average UK rents increased by roughly 9% year on year through 2025, according to the ONS, with some regions seeing even steeper rises. Mortgage holders who fixed at low rates during the pandemic have started rolling onto higher deals. The cumulative effect is that many people who previously managed their finances comfortably are now falling behind on payments.

Recognising the Warning Signs of Problem Debt

Debt does not always announce itself. It often creeps up gradually. You might notice you are relying on credit cards for everyday shopping, or that your overdraft never clears before the next payday. Missing minimum payments, receiving letters from creditors, or borrowing from one source to repay another are all signals that your debt has moved beyond manageable.

According to the Money and Pensions Service, over 8.3 million adults in the UK have serious debt problems. The StepChange Debt Charity reported a significant increase in people seeking help with essential household bills rather than traditional consumer credit. This shift reflects the direct impact of living costs on personal finances.

If any of this sounds familiar, getting cost of living help early is the single most important step you can take. The sooner you address the issue, the more options remain open to you. Our guide on practical tips for dealing with debt is a good starting point.

Cost of Living Help: What Support Is Available?

The UK government and various organisations offer support to help with the cost of living. Here are some of the main avenues worth exploring:

Government Support Schemes

The GOV.UK cost of living hub lists current support available, including the Household Support Fund distributed through local councils. Eligibility varies by area, but the fund can help with energy bills, food costs, and other essentials. If you receive means-tested benefits, you may also qualify for additional cost of living payments announced in the Spring Budget.

Energy Bill Support

If you are behind on energy bills, contact your supplier directly. Under Ofgem rules, suppliers must offer repayment plans you can realistically afford. The Warm Home Discount scheme provides a £150 rebate on electricity bills for eligible low-income households. You can also check whether your local authority offers emergency fuel vouchers. For more on managing energy costs, read our article on energy saving tips to help you avoid debt.

Council Tax Reduction

Every council in England operates a Council Tax Reduction scheme. If your income has dropped or you are on benefits, you could receive a discount of up to 100%. Contact your local council to apply. You may also qualify for a discount if you live alone or have a disability.

Free Debt Advice

Free, impartial debt advice is available from several organisations including MoneyHelper (backed by the Money and Pensions Service), StepChange, Citizens Advice, and National Debtline. These services can help you create a budget, negotiate with creditors, and explore formal debt solutions.

Debt Solutions That Can Help You Regain Control

When debts become unmanageable, there are several formal solutions available under UK law. The right option depends on your circumstances, the amount you owe, and your ability to make payments.

Individual Voluntary Arrangement (IVA)

An IVA is a legally binding agreement between you and your creditors, arranged through a licensed insolvency practitioner. You make affordable monthly payments over a fixed period, typically five or six years, and any remaining unsecured debt is written off at the end. During the arrangement, interest and charges are frozen, and creditors cannot take further legal action against you.

An IVA is available to residents of England, Wales, and Northern Ireland. To qualify, you generally need unsecured debts of £6,000 or more and the ability to make regular monthly contributions. You can learn more about the timeline in our guide on how long an IVA lasts.

Debt Relief Order (DRO)

A DRO is designed for people with relatively low debts (up to £50,000 since June 2024), minimal assets, and low disposable income. It provides a 12-month moratorium during which creditors cannot chase you for payment. After 12 months, qualifying debts are written off entirely. Read our guide on debts that can be included in a DRO for more detail.

Debt Management Plan (DMP)

A DMP is an informal arrangement where you make reduced payments to your creditors based on what you can afford. While not legally binding, it gives you breathing space and a clear structure for repaying what you owe. Many free debt advice agencies can set up a DMP on your behalf.

Bankruptcy

Bankruptcy is a last resort for serious debt situations. It writes off most unsecured debts, but it has significant consequences for your credit rating, assets, and potentially your employment. The current fee to apply for bankruptcy in England and Wales is £680. It should only be considered after exploring all other options.

How to Deal With Rising Utility Bills

Utility bills remain one of the biggest pressures on household budgets. Beyond seeking formal support, there are practical steps you can take to reduce costs. Switching to a better tariff (where available), improving home insulation, and monitoring your energy usage with a smart meter can all make a real difference. Our detailed guide on dealing with rising utility bills covers this in depth.

If you are already behind on payments, do not ignore the problem. Energy suppliers would rather agree a repayment plan than escalate to debt collection. Contact them as soon as possible and be honest about what you can afford.

Protecting Your Mental Health During Financial Difficulty

Financial stress takes a genuine toll on mental wellbeing. Research by the Money and Mental Health Policy Institute shows that people in problem debt are three times more likely to experience depression and anxiety. Acknowledging the emotional weight of money worries is not weakness: it is an important part of addressing the overall situation.

If debt is affecting your mental health, speak to your GP. Many debt advice services also have trained counsellors who understand the link between money and mental health. You do not have to deal with everything alone.

Taking the First Step Towards Cost of Living Help

The most important thing you can do right now is take action. Whether that means calling a free advice line, checking your eligibility for government support, or speaking to an insolvency practitioner about formal debt solutions, every step forward is progress.

Swift Debt Help provides free initial assessments to help you understand your options. We work with licensed insolvency practitioners who can advise on IVAs, DROs, and other debt solutions tailored to your situation. Everything discussed is confidential, and there is no obligation to proceed.

This article is for general information purposes only and does not constitute financial advice. If you are struggling with debt, we recommend speaking to a qualified debt adviser or licensed insolvency practitioner who can assess your individual circumstances.

Updated for 2026

If you are struggling with multiple debts, a Debt Relief Order (DRO) could provide a way to get back on track. A DRO is designed for people with relatively low levels of debt who have little disposable income and few assets. But which debts actually qualify? Here are eight types of debt that can typically be included in a Debt Relief Order.

What Is a Debt Relief Order?

A Debt Relief Order is a form of insolvency available in England, Wales and Northern Ireland. It offers an alternative to bankruptcy for people who cannot realistically pay off what they owe. Once a DRO is in place, your creditors cannot chase you for the debts included in it, and after 12 months the debts are usually written off entirely.

To qualify for a DRO in 2026, you need to meet several criteria. Your total qualifying debt must be below £50,000, you must have £75 or less per month in spare income after essential living costs, and your assets must be worth £2,000 or less (excluding a vehicle worth up to £4,000). You must also have lived or worked in England or Wales within the last three years.

Your name will appear on the Individual Insolvency Register for the duration of the DRO plus three months. Not every debt qualifies for inclusion: student loans, criminal fines and some other debts are excluded. The debts that can be included are known as qualifying debts.

How Long Does a Debt Relief Order Last?

Most DROs last for 12 months. During that period, your financial situation is monitored by the Official Receiver, an officer of the Insolvency Service. If your circumstances remain broadly the same and you continue to meet the criteria, your qualifying debts are written off at the end of the 12 months.

The Official Receiver can extend a DRO or end it early depending on any changes to your situation. For example, if you come into money or your income increases significantly, the DRO may be revoked.

8 Debts That Can Be Included in a Debt Relief Order

1. Council Tax and Utility Arrears

Household arrears are among the most common debts included in a DRO. This covers outstanding council tax, gas, electricity, water and telephone bills. Council tax arrears are particularly important to address, as local authorities have strong enforcement powers, including the use of bailiffs and, in extreme cases, committal proceedings.

A DRO is one route for clearing council tax debt. Bear in mind that only arrears up to the date of the DRO are covered. You will still need to keep up with your current council tax payments going forward.

2. Credit Card Debt

Credit card debt is one of the most widespread forms of unsecured borrowing in the UK. According to MoneyHelper, many households carry significant credit card balances that can quickly grow due to compound interest. If you are only making minimum payments, it can take years to clear the balance.

Credit card debt is a qualifying debt for a DRO. Once included, your creditors cannot pursue you for the balance during the moratorium period, and the debt is written off at the end.

3. Payday Loans

Payday loans are short-term, high-interest loans typically borrowed between paydays. They usually range from £50 to £1,000 and are designed to be repaid within weeks. The interest rates on these loans can be extremely high, and many borrowers find themselves in a cycle of re-borrowing.

If you are trapped in payday loan debt, a DRO can provide a clean break. Payday loan debts are qualifying debts and can be written off at the end of the 12-month DRO period.

4. Overdrafts

Overdraft debt can creep up without you realising, particularly if you treat your overdraft limit as part of your available balance. Banks can charge daily or monthly fees for arranged overdrafts, and unauthorised overdrafts can attract even higher charges.

One thing to be aware of: if your current account is with the same bank you owe the overdraft to, they may use a “right of set-off” to take money from your account to recover what you owe. A DRO can include overdraft debt and have it written off after 12 months.

5. Benefit Overpayments

Benefit overpayments happen when you receive more in benefits than you were entitled to. This can occur for various reasons, such as a change in circumstances that was not reported promptly or an administrative error by the Department for Work and Pensions.

Benefit overpayments can be included in a DRO, provided they were not caused by fraud. Once the overpayment is listed in your DRO, the DWP cannot recover the amount during the moratorium, and it will be written off at the end.

6. Hire Purchase and Conditional Sale Agreements

With hire purchase and conditional sale agreements, you do not legally own the item until the final payment is made. If you have paid less than a third of the total amount and miss payments, the creditor may be entitled to repossess the item if you have a DRO.

In some situations, if you are up to date with your hire purchase payments, you may be able to exclude the agreement from your DRO and keep the item. It is important to discuss this with your Official Receiver. You must also inform any hire purchase or conditional sale creditor that you have a DRO.

7. Buy Now, Pay Later and Finance Agreements

Buy Now, Pay Later (BNPL) purchases and other consumer finance agreements, such as those used to buy household items like washing machines or sofas, are qualifying debts for a DRO. These agreements may carry interest after an initial interest-free period, and missed payments can lead to additional charges.

If the finance is secured against the item itself, the creditor may have the right to repossess it. Check the terms of your agreement carefully. BNPL lending is expected to come under full FCA regulation in the near future, which may change how these debts are treated in insolvency.

8. Loans From Family or Friends

Informal loans from family members or friends can also be included in a Debt Relief Order. These are treated the same as any other qualifying debt, which means the person who lent you money will not be repaid.

This can understandably cause tension in personal relationships. If you have borrowed from someone close to you, it is worth having an honest conversation before applying for a DRO so they understand the implications.

Debts That Cannot Be Included in a DRO

Not every debt qualifies. Student loans, magistrates court fines, child maintenance arrears and debts arising from fraud are all excluded from DROs. Social fund loans and some types of compensation orders may also be excluded. If you are unsure whether a particular debt qualifies, seek advice from an authorised debt adviser.

Is a Debt Relief Order Right for You?

A DRO is just one of several debt solutions available. Others include Individual Voluntary Arrangements (IVAs), Debt Management Plans, and bankruptcy. The right option depends on your total debt, income, assets and personal circumstances.

At Swift Debt Help, we can assess your financial situation and help you understand which solution might work for you. This content is for general information only and does not constitute financial advice. Always speak to a qualified professional before making decisions about your debts.