The UK’s 2025 Budget introduced a major reform to England’s property taxation system: a new annual levy on homes valued at £2 million or more, effective from 6 April 2028. Often called the ‘mansion tax’, the measure is formally named the High Value Council Tax Surcharge and forms part of the Government’s wider effort to modernise property taxation and ensure high‑value homes contribute more proportionately.
What is the mansion tax?
The surcharge is an annual charge applied in addition to existing council tax. Although collected through the council tax system, the revenue goes to central government. The aim is to introduce a fairer contribution from the most expensive homes without conducting a full revaluation of all properties.
Property values used for the surcharge will be assessed in 2026, with the first bills issued from April 2028.
Why introduce it?
Council tax bands are still based on 1991 property values, which no longer reflect today’s market. This has led to distortions where some very high‑value properties pay relatively little in council tax compared to modest homes elsewhere. The Government cites examples such as an average Band D household paying more than some multimillion‑pound homes in central London.
By applying an additional levy to properties over £2 million, the Government aims to better align taxation with wealth distribution and raise up to £430 million of revenue in 2028/29.
How much will homeowners pay?
From April 2028, the surcharge will apply as follows:
- £2m – £2.5m: £2,500
- £2.5m – £3.5m: £3,500
- £3.5m – £5m: £5,000
- Over £5m: £7,500
These amounts will increase annually with CPI inflation from 2029/30.
Illustrative examples show the impact:
- A £2.1m home in Bishop’s Stortford faces a total annual bill of £7,109.20, adding £2,500 to existing council tax.
- A £5.2m home in Newquay would pay £12,419.84, including the £7,500 surcharge.
- A £1.95m home in Bristol remains below the threshold and pays only existing council tax.
For some homeowners, particularly those just above the £2m threshold, the surcharge creates sharp tax increases compared with similar lower‑value homes.
Those with second homes over £2 million may face even greater costs. Since 2025, councils can impose a 100% council‑tax premium on second homes. Combined with the surcharge, this could nearly triple the annual property tax compared with a main residence below the threshold.
Valuations and appeals
The Valuation Office Agency will value homes primarily using digital assessment and market data. High‑value homes often lack close comparables, so some valuations may be open to challenge. Homeowners disputing their valuation may wish to obtain an independent professional report. Revaluations will occur every five years, with the next after implementation scheduled for 2031.
Who will be affected?
Fewer than 1% of English homes are expected to fall within scope, concentrated mainly in London and the South East. Liability rests with the owner, not the occupant, which may affect long‑term homeowners who have seen large increases in property values over time. Social housing is excluded.
Interaction with other property taxes
The mansion tax sits alongside other regimes such as the Annual Tax on Enveloped Dwellings (ATED), which applies to companies holding residential properties worth over £500,000. It also operates independently from Stamp Duty Land Tax (SDLT) and local second‑home premiums, though together these can substantially increase costs for high‑value property owners.
What should homeowners do now?
Owners of properties that may exceed the £2m threshold should monitor local sale prices and consider obtaining early valuations. Planning for higher ongoing ownership costs from 2028 is sensible and upcoming government consultations may clarify reliefs, exemptions or possible deferral schemes for asset‑rich, income‑poor homeowners.
This article is for information purposes only and is not a substitute for tax or legal advice, and should not be relied upon as such. Please contact Hollie Halston, Cathy Bryant or Anthony Reeves if you have any queries on the above or corporate tax issues generally.
