Mansion tax: How the government’s High Value Council Tax Surcharge will work

The government is set to bring in its so-called mansion tax which will see owners of homes in England worth £2 million or more hit with an extra annual charge from April 2028.

Chancellor Rachel Reeves announced plans for the High Value Council Tax Surcharge (HVCTS) in her 2025 Autumn Budget, claiming it would make the council tax system fairer.

Under the current council tax system, a band D property in Darlington, County Durham worth £400,000 pays £2,400 to £2,600 in council tax annually, but a band H property in Mayfair, London valued at £10 million pays around £2,100, according to the government.

Start your trial of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Sign up

Following a consultation, the government has confirmed it plans to go ahead with the surcharge, subject to legislative approval.

Tom Bill, head of UK residential research at estate agent Knight Frank, said: “The instincts of the prime minister and the chancellor are to look more closely at how housing equity is distributed around the country, housing wealth and the split between the north and the south, but that requires any kind of land value tax or proportional property tax.

“That's a much much bigger undertaking that they don't have the bandwidth for at the moment. The HVCTS has become a shortcut for the government to start to look at high value properties rather than rebanding and revaluing every property in the country.”

How high value homes will be valued for the mansion tax

The Valuation Office (VO) will conduct a targeted valuation exercise to identify properties in scope.

It will identify homes worth more than £2 million as of April 2026 and adjust for differences between properties include the sale price, property type, size, age, number of rooms and parking.

Homeowners will be able to see their draft bands in Autumn 2027. How much homeowners will be charged depends on the value of their home.

A minimum of £2,500 will be charged for a property valued in the lowest £2 million to £2.5 million band rising to £7,500 for a property valued in the highest band of £5 million or more.

Charges will be uprated in line with CPI inflation each year.

Source: Gov.uk

Revaluations of properties will be conducted by the VO every five years.

Properties built after implementation of the HVCTS but before the next scheduled revaluation will be valued and banded either on completion or from the day they are occupied.

Homes that have been significantly improved or changed after the implementation date, for example by adding a large extension, will be revalued and banded at the sooner of either the next revaluation or sale of the property, according to consultation documents.

It will be the owners of a property rather than the occupiers who pay the HVCTS. This means a landlord rather than a tenant would pay the charge if a home worth more than £2 million was being rented out.

This also means leaseholders will be liable for the mansion tax in a high-value home.

Where a property is held in trust for a child, trustees will be liable.

Owners of empty properties to pay more

Owners of properties left empty and unoccupied for 12 months or more will have to pay a 100% premium on top of the existing HVCTS from April 2028, according to Budget documents.

This means those with a property worth over £5 million would pay £15,000 per year if they left it empty for at least 12 months.

Polly Ogden Duffy, managing director of estate agents John D Wood, said charging this premium was unlikely to make high net-worth individuals sell up but it could make less wealthy owners do so.

“If you are a young professional couple that has inherited a home from a parent and you make a decision to sell it, or rent it, you might get on with things a bit faster,” she said.

“But I don’t think it’s going to suddenly create or encourage an altogether different behaviour. The tax isn’t enough for it to hurt most people who own a property at that price point.”

Mansion tax exemptions

There will be some exemptions to the mansion tax such as for individuals who bought or inherited their home but who now have lower income, or those who experience a temporary change in circumstances such as job loss or ill health.

The government said it will make a deferral scheme available which permits payment of HVCTS to be delayed until a property is sold, where individuals meet specific eligibility criteria.

This will be targeted at those on lower incomes – with an income threshold of £35,000 – and not for second homes or to companies that own property.

Deferral will also be available in certain circumstances where the property is the main home of someone who is disabled or severely mentally impaired.

Mansion tax discounts

The government has proposed offering a discount or exemption to charities and also to properties such as halls of residences, property owned by the Ministry of Defence and by organisations predominantly for the accommodation of those seeking refuge from domestic violence.

There may also be discounts for people who own a property tied to their employment.

The consultation said: “In some sectors, particularly agriculture, business owners may need to live on the site where their business operates for practical reasons. For example, a farmer may need to own and live in a home located on their farm.

“Outside agriculture, it is less common for ownership and occupation to coincide. For example, accommodation used to house members of a religious institution is typically owned by the institution rather than those occupying it.”

When would you need to pay the mansion tax?

The HVCTS will be collected by councils at the same time as council tax.

Once the valuations are ready, local authorities will identify owners and send the first bills in March 2028.

You will be able to contact your local authority for information on deferral and discounts in advance of the first bill or at any time if circumstances change.

Can you challenge the mansion tax?

Homeowners will be able to challenge valuations, similar to how you can appeal council tax charges.

If you think you have been incorrectly billed or banded, you will be able to complain to the VO or the local authority.

If you are not happy with the outcome of the initial challenge, you will be able to appeal to the Valuation Tribunal for England (VTE).

The government is providing an initial eight month period to challenge banding rather than the typical six month period for mainstream council tax.

As with council tax, where an individual submits a challenge or appeal they will be required to continue paying HVCTS.

Any overpayments will be refunded or liabilities adjusted if necessary.

Sarah Coles, head of personal finance at investment platform AJ Bell, said: “There will be plenty of people breaking out the world’s smallest violins for those in expensive homes.

“However, it could cause problems for people who are asset rich but cash poor. They may decide to bring forward any downsizing plans, and then struggle to sell before the charge kicks in.”