I am sorry to hear you are worried about Milly. My name is Rebecca. I am a veterinarian and will do my best to help.
This is a common problem, but can be caused by many different things. The treatment depends on what is causing the skin irritation.
Is Milly being treated for fleas? Breaking out around the tail is common in dogs that have developed an allergy to flea bites. Even if you do not see any fleas, I would start by putting some Frontline or Advantage on her.
Infected or impacted anal glands can make a dog's skin break out around the tail. The treatment is having the glands emptied and antibiotics if there is infection.
Allergies to things in the environment is another possible cause. We have no cure for allergies, but prescription drugs like Apoquel, steroids or cyclosporine may help; over the counter antihistamines may help, and supplements like quercetin, nettles and fish oil may help.
This could be a skin infection that requires antibiotics.
Another less likely cause of skin irritation is "mange" which is caused by tiny mites living in the hair follicles. A product called Revolution kills both fleas and some types (but not all) mites.
If this were my own dog, I would begin with a good physical exam, check the anal glands, and take some scrapings of the skin to look for infection and mites. In any dog that has a skin irritation around the tail, I would use a good flea product even if no fleas were seen. The dogs that are the most allergic can react to just a couple of flea bites, and it is impossible to find 2 fleas on a whole dog.
Let me know what else I can help with or answer. Rebecca