In her Autumn Budget, the Chancellor announced one of the most debated measures of the year: a mansion tax-style surcharge on high-value residential properties. This policy reflects the government’s intention to raise revenue from property wealth rather than income, aligning with its broader political agenda.
From April 2028, owners of residential properties valued at over £2 million (as at 2026) will be liable for the Mansion Tax. This will be a recurring annual charge, payable in addition to Council Tax, and formally referred to as the High-Value Council Tax Surcharge.
The charging structure will be as follows:
| Property Value | Surcharge |
| £2m – £2.5m | £2,500 |
| £2.5m – £3.5m | £3,500 |
| £3.5m – £5m | £5,000 |
| £5m+ | £7,500 |
HM Valuation Office will carry out a targeted valuation exercise to identify properties above the £2 million threshold.
While the process may draw on the existing Council Tax banding system, eligibility will not be based on current bands (which date back to 1991).
Revaluations for Mansion Tax purposes will occur every five years.
The surcharge will be collected by Local Authorities alongside Council Tax, but the revenue will go to central government.
A public consultation in early 2026 will address reliefs, exemptions, and rules for complex ownership structures such as companies, trusts, partnerships, and funds.
However, there is a concern that the narrow valuation brackets may lead to disputes. Furthermore, the administration and collection of the tax could place additional strain on local councils.
Nevertheless, the government could point to the successful implementation of similar property-related taxes, such as the Annual Tax on Enveloped Dwellings (ATED), as evidence that such measures can work.
The tax applies to primary residences and second homes, making it particularly relevant for landowners and rural business owners.
Annual charges could create cash flow challenges for asset-rich but income-poor individuals and businesses, e.g. farmers and other rural businesses.
Farmers, already impacted by last year’s Budget changes, may now face additional tax burdens. The Mansion Tax will be payable in addition to annual instalments of Inheritance Tax that may arise following changes to key reliefs such as Agricultural Property Relief (APR) and Business Property Relief (BPR) from April 2026 – see below.
Although the tax targets owners rather than occupiers, questions remain about whether and how costs might be passed on.
The Mansion Tax is fundamentally a tax on wealth, reinforcing the government’s focus on property-based taxation. For landowning families and rural business owners, this raises important considerations for succession planning.
In addition to the Mansion Tax, significant changes to APR and BPR will take effect from April 2026, with transitional rules already in place since 30 October 2024. These changes could substantially increase Inheritance Tax exposure for farming and rural businesses.
In the November 2025 Budget, the Chancellor announced a minor change to the original APR/BPR policy, namely the transferability of the £1m allowance between spouses, creating a combined allowance of up to £2 million on second death. This is a sensible but relatively limited concession in the wider context of the changes to these IHT reliefs, which still stand to have a profound effect on landowners and business owners.
The clock is ticking to 6 April 2026 when these changes will bite, and the window for estate planning before then is closing rapidly.
In order to take advantage of the more generous APR and BPR reliefs as they currently stand, we encourage our clients to:
The Mansion Tax represents a significant shift in property taxation, with far-reaching implications for landowners, rural businesses, and succession planning strategies.
Now is the time to assess potential exposure to this tax and other taxes and prepare for change.
