Mansion Tax

High Value Council Tax Surcharge: The New “Mansion Tax”

For many years, governments have debated whether owners of the most valuable homes should pay an additional property tax. That debate has now resulted in plans for a High Value Council Tax Surcharge, sometimes described as a new mansion tax.

The surcharge is intended to apply in England from April 2028 to residential properties valued at £2 million or more.

It will not replace Council Tax. Owners of affected properties will continue paying their normal Council Tax bill and will pay the new surcharge in addition.

The detailed rules have been subject to consultation and may change before the scheme begins. Property owners should therefore treat the published arrangements as the government's proposed framework until the final legislation and guidance are available.

Why Is the New Charge Being Introduced?

Council Tax in England is still based on the value that a property would have had on 1 April 1991.

There are only eight Council Tax bands, with Band H covering all properties above the highest valuation threshold. This means that a very expensive property can pay the same Council Tax as another property worth substantially less.

In some local authority areas, a multimillion-pound home can pay less Council Tax than a more modest family home in another part of England because each council sets its own charge.

The government says the new surcharge is intended to address some of this imbalance without carrying out a complete national Council Tax revaluation.

Which Properties Will Be Affected?

The surcharge is intended to apply to residential property in England valued at £2 million or more using 2026 property values.

This may include:

• Houses
• Flats and apartments
• Second homes
• Rental properties
• Residential property owned through a company
• Residential property held in trust
• Properties containing a distinct and self-contained residential element

Fewer than 1% of homes in England are expected to fall within the charge.

The proposals do not apply to properties in Scotland, Wales or Northern Ireland, where separate property taxation systems operate.

How Will Properties Be Valued?

The Valuation Office will carry out a targeted valuation exercise to identify residential properties worth at least £2 million.

Valuations will be based on the amount the property could reasonably have sold for on the open market at the relevant valuation date in 2026.

The assessment may take account of matters such as:

• The property's location
• Its size and type
• The number of bedrooms
• The size of the land
• Its condition and character
• Comparable sales
• Development or planning features affecting its value

A draft list of properties expected to be liable is due to be published before the surcharge begins. Owners should have an opportunity to correct factual errors before the final list is issued.

Will Every Property Be Inspected?

The Valuation Office is unlikely to need to inspect every property internally. Valuations may be based on existing records, property characteristics, market evidence and comparable sales.

An inspection may be necessary where the available information is incomplete or disputed.

Owners should check that information held about their property is accurate, particularly its floor area, number of rooms, property type and whether separate buildings form part of the same dwelling.

How Much Will the Surcharge Be?

The proposed annual charges from April 2028 are:

• Properties valued from £2 million to £2.5 million: £2,500
• Properties valued above £2.5 million and up to £3.5 million: £3,500
• Properties valued above £3.5 million and up to £5 million: £5,000
• Properties valued above £5 million: £7,500

The charge will be based on bands rather than applying a percentage to the exact value of the property.

This means a home valued at £2.1 million and one valued at £2.49 million would initially pay the same surcharge. Moving just above a band threshold could produce a significant increase in the annual charge.

The charges are intended to increase in line with inflation from the 2029–2030 financial year.

Who Will Be Responsible for Paying?

Unlike ordinary Council Tax, which is normally payable by the occupier, the High Value Council Tax Surcharge will generally be payable by the property owner.

This distinction matters where a property is rented out. The tenant may pay the ordinary Council Tax. At the same time, the owner may remain responsible for the high-value surcharge.

Joint Owners

Where there are two or more legal owners, they are expected to be jointly and severally liable.

This means the council may pursue any one of the owners for the full amount, leaving the owners to resolve between themselves how the cost should be shared.

Leasehold Property

For property held under a long lease, the leaseholder is expected to be liable rather than the freeholder.

The proposed definition generally covers a lease originally granted for more than 21 years.

This may create difficult cases where a valuable flat has a relatively short remaining lease. The leaseholder's interest is worth substantially less than the value of the property with a long lease.

Property Owned by a Company

Where a company legally owns the property, the company is expected to be responsible for paying the surcharge.

Company ownership will not, by itself, avoid the charge.

Property Held in Trust

Where trustees are the registered legal owners, the trustees are expected to be liable. Where there is more than one trustee, they may be jointly and severally responsible.

The trust document and the trustees' powers may determine whether the cost can ultimately be met from trust assets or attributed to a beneficiary.

What If the Property Is Rented Out?

The legal owner is expected to remain liable even where a tenant occupies the property.

A landlord cannot assume that the tenant will be responsible merely because the tenancy agreement requires the tenant to pay Council Tax.

Landlords should review tenancy agreements before attempting to pass on any part of the surcharge. Consumer, contractual and rent regulation rules may affect whether an additional charge can lawfully be recovered.

Will There Be Exemptions or Discounts?

The government has proposed exemptions or discounts for certain types of property, including:

• Purpose-built student halls of residence
• Qualifying armed forces accommodation owned by the Ministry of Defence
• Qualifying diplomatic accommodation
• Property owned by registered social housing providers

Further consideration has been given to tied accommodation where a person is required to occupy a particular property as a condition of their employment.

The final list of exemptions and discounts may change following consultation.

Will Ordinary Council Tax Discounts Apply?

Existing Council Tax reductions will not necessarily reduce the High Value Council Tax Surcharge.

For example, a single-person discount on the normal Council Tax bill is not expected automatically to reduce the high-value charge.

The new scheme will have its own rules governing exemptions, discounts and payment support.

What If You Are Asset Rich but Cash Poor?

A major concern is the position of people who have lived in their home for many years and have seen its value rise substantially but do not have a high income.

This could include:

• Older homeowners living on a pension
• Widowed owners
• People who inherited a family home
• Owners whose area has experienced rapid property-price growth
• People unable to work because of illness or disability

The government proposes a deferral scheme allowing some owners to postpone payment until the property is sold or ownership otherwise changes.

Proposed Financial Conditions for Deferral

The consultation proposed that deferral could be available for a person's main home where the household has:

• Annual household income of £35,000 or less
• Capital savings of £16,000 or less

These figures are not yet confirmed and may change following consultation.

Additional eligibility may be available where a disabled person lives in the property or the household satisfies specified disability-related conditions.

Deferral is not expected to be available for second homes or properties owned by companies.

Will Deferral Be Free?

No. The deferred amount is expected to become a secured debt against the property.

Interest is also expected to be charged while payment remains deferred. The final interest rate has not yet been fixed.

The accumulated surcharge and interest would normally be recovered when the property is sold, transferred or otherwise changes ownership.

Deferral therefore postpones payment rather than cancelling the tax.

How Will the Surcharge Be Collected?

Local authorities are expected to issue and collect the surcharge alongside the Council Tax system. However, the money will support local government funding more generally.

The owner may receive a separate charge or a Council Tax bill showing the surcharge as an additional amount.

The payment dates and instalment arrangements will be set out in the final scheme.

Owners should not assume that a dispute over the valuation suspends the obligation to pay. Under the proposed system, the charge will continue to be payable while a challenge or appeal is considered. Any overpayment would be refunded or credited if the challenge succeeds.

How Can a Property Valuation Be Challenged?

An owner may be able to challenge the assessment where they believe:

• The property is worth less than £2 million
• The property has been placed in the wrong surcharge band
• The wrong property has been assessed
• The property should be exempt
• The recorded size or description is incorrect
• A significant physical change has reduced its value
• The valuation fails to reflect relevant comparable sales
• The property has been divided, merged or substantially altered

What Evidence May Be Needed?

Useful evidence may include:

• Completed sales of genuinely comparable properties
• Accurate floor plans and measurements
• Evidence of structural defects
• Planning restrictions
• Lease details
• Evidence of a significant change in the surrounding area
• Professional valuation evidence
• Documents showing that the property is not a single dwelling

An asking price or an online property estimate may not be accepted as reliable evidence. A property listed at £1.9 million has not necessarily been proved to be worth less than £2 million, particularly if it has not sold.

Time Limits for a Challenge

The proposed system gives owners an initial eight-month period to challenge their band when the surcharge is first introduced.

After the introductory period, a six-month challenge period is expected to apply following events such as:

• A new valuation
• A revaluation
• A change to the property's band
• A new owner becoming liable

Some disputes, including whether the correct person has been billed or whether a deferral applies, may not be subject to the same fixed time limit.

Appealing to the Valuation Tribunal

The owner must normally challenge the decision with the Valuation Office or local authority first.

If the dispute is not resolved, an appeal may be made to the Valuation Tribunal for England.

The Valuation Office will deal primarily with disputes about valuation and banding. The local authority will deal with matters such as liability, billing, exemptions and deferral eligibility.

Will Properties Be Revalued?

High-value properties are expected to be revalued every five years.

The first surcharge will use 2026 values, with the next planned revaluation taking place in 2033.

Revaluation means a property may move into or out of the scheme or move between surcharge bands.

The government will decide separately whether the £2 million threshold and the other band limits should also be increased when revaluations take place.

What Happens If the Property Is Improved?

Alterations may increase a property's value, but the precise time at which an improvement affects the surcharge may depend on the final rules.

Relevant works might include:

• A substantial extension
• Combining two properties
• Converting ancillary accommodation into living space
• Adding significant leisure facilities
• Major redevelopment

Owners should keep records of alterations, planning permissions and completion dates.

Conversely, demolition, subdivision, serious structural damage or a significant adverse change in the surrounding area may support a lower valuation.

What Happens When the Property Is Sold?

The surcharge is an annual ownership charge rather than a tax calculated directly on the sale proceeds.

The seller will need to ensure that outstanding charges are dealt with as part of the conveyancing process.

Where payment has been deferred, the accumulated debt and interest are expected to be secured against the property and repaid when ownership changes.

A buyer purchasing a property worth £2 million or more should check:

• The property's surcharge band
• Whether any challenge or appeal is outstanding
• Whether deferred charges are secured against the title
• Which party is responsible for the charge for the relevant year
• Whether the valuation may change following the sale

The sale may also provide fresh market evidence relevant to the property's valuation.

Other Taxes on High-Value Property

The High Value Council Tax Surcharge should not be confused with other property taxes.

Stamp Duty Land Tax

A buyer purchasing residential property in England or Northern Ireland may have to pay Stamp Duty Land Tax.

Higher rates normally apply where the purchase leaves the buyer owning more than one residential property. A separate surcharge may also apply to a non-UK resident buyer.

These charges are payable on acquisition and are separate from the annual High Value Council Tax Surcharge.

Annual Tax on Enveloped Dwellings

Annual Tax on Enveloped Dwellings, known as ATED, can apply where residential property worth more than £500,000 is owned by a company, partnership with a corporate member or certain collective investment arrangements.

ATED is already an annual tax and can produce substantial charges on high-value properties. Relief may be available for qualifying property rental businesses, developers and other commercial uses, but a return may still be required.

A company-owned property could potentially fall within both ATED and the new High Value Council Tax Surcharge unless the final legislation provides otherwise.

Capital Gains Tax

Capital Gains Tax may be payable when a property is sold for more than its allowable acquisition cost and expenses.

Private residence relief may protect some or all of the gain on a person's main home. Still, it may not provide full protection where:

• The property was let
• Part was used exclusively for business
• The grounds exceed the permitted area
• The owner lived elsewhere for substantial periods
• The property is owned by a company

Inheritance Tax

A valuable home will normally form part of its owner's estate for Inheritance Tax purposes.

The residence nil-rate band can provide an additional allowance where a qualifying home passes to direct descendants, but it is reduced for estates worth more than £2 million.

The introduction of the annual surcharge does not reduce the property's value for Inheritance Tax.

Will the Surcharge Reduce Property Prices?

An additional annual cost may affect demand for properties close to the surcharge thresholds, particularly where a property falls just above £2 million or another band boundary.

Possible effects include:

• Buyers negotiating lower prices
• Owners challenging valuations
• Greater demand for homes just below a threshold
• Some cash-poor owners deciding to sell
• Changes to the way properties are held
• Pressure on rents where landlords attempt to recover the cost

However, the surcharge is only one factor affecting the value of high-end property. Interest rates, international demand, local supply, taxation and the wider economy may have a greater effect.

Is This a Mansion Tax?

Although the government calls it the High Value Council Tax Surcharge, it has many features commonly associated with a mansion tax:

• It is an annual charge
• It applies only above a high property-value threshold
• The amount increases for more valuable homes
• It is paid in addition to existing property taxes

However, it is not calculated as a percentage of the property's value and will use four fixed charging bands.

The word "mansion" can also be misleading. A property does not need extensive grounds, a swimming pool or a particularly grand appearance. In some parts of London and the South East, an ordinary-looking house or flat may exceed the £2 million threshold.

What Should Owners Do Now?

The surcharge is not due to begin until April 2028. Still, owners of potentially affected properties should consider:

• Obtaining an informed indication of the property's 2026 market value
• Checking Land Registry and Valuation Office property details
• Keeping evidence of significant defects or restrictions
• Reviewing company, trust or leasehold ownership arrangements
• Considering whether a deferral may be required
• Planning for the additional annual cost
• Taking advice before transferring ownership

Transferring a property to another person or company solely to avoid the surcharge may create Stamp Duty Land Tax, Capital Gains Tax, Inheritance Tax, mortgage and legal consequences.

Speak to a Property or Tax Solicitor

Professional advice may be useful where:

• The property is close to a valuation threshold
• The Valuation Office information is incorrect
• The property is held through a company or trust
• There are several joint owners
• The property is subject to a long lease
• The owner wishes to challenge the surcharge band
• A deferred charge may affect a sale or estate

A property or tax solicitor can advise on ownership, liability, appeals, conveyancing and the interaction with other property taxes. A qualified valuation surveyor may be needed where the dispute concerns market value.

Disclaimer: Solicitors.com is not a firm of solicitors. Content on this site is provided for general information and is not legal, valuation, financial or tax advice. The High Value Council Tax Surcharge is not expected to begin until April 2028, and parts of the detailed scheme remain subject to legislation and final government decisions. The proposals relate to England only. You should obtain advice from a regulated solicitor, tax adviser or qualified surveyor about your circumstances. Use of this site does not establish a solicitor-client relationship.

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