Mansion tax

A new council tax charge, the High Value Council Tax Surcharge (HVCTS), is to be introduced in April 2028. The charge, dubbed ‘the mansion tax’, will be a recurring annual charge. It will apply to owners of residential properties worth more than £2 million in 2026 and will be levied on the homeowner rather than on the occupier. Social housing will be outside the scope of the charge.

Council tax, which was introduced in 1993, taxes domestic property to provide money to fund local services. Properties are grouped into eight valuation bands, based on property values in 1991. Local authorities set the charge for each band.

Under the HVCS, properties worth at least £2 million will be placed in bands based on their property values. The amount of the annual charge will depend on the band into which the property falls. The initial rates are set out below. The charges will increase each year from 2029/30 in line with increases in the CPI.

Property value	Annual charge
£2m to £2.5m	£2,500
£2.5m to £3.5m	£3,500
£3.5m to £5m	£5,000
£5m and above	£7,500

The charge will be administered by local authorities alongside council tax.

The Valuation Office are to undertake a targeted valuation exercise to identify properties valued at £2 million and above. It is expected that less than 1% of properties in the UK will fall within the scope of the HVCS.

It is interesting that it is the value of the property that determines the contribution to public services rather than the number of people using those services. Two people in a £2 million house are unlikely to use more local services than five people in an £800,000 house.

The charge takes no account of average property values, the amount of equity in a property and the original purchase cost, or the income of the occupants. Many fairly normal family homes in London are worth at least £2 million – it is questionable whether anyone would regard a three-bed semi as a mansion.

Where a property was purchased many years ago and is now worth more than £2 million, the owners will not necessarily have the income level now which would support the purchase of a £2 million property. This may be the case for elderly people who have lived in their home for a long time. However, the factsheet published on the HVCTS states that the Government will ensure that a support scheme is in place for those who may struggle to pay the charge but note that ‘it is important this scheme is targeted at those who need it most’.

The Government are to consult on the details of the charge in early 2026. Support for those struggling to pay and a full set of reliefs and exemptions will form a key part of the consultation. Consideration will also be given to properties with more complex ownership structures, such as those owned by companies, trusts, partnerships and funds. The consultation will also address the treatment of those required to live in a property as a condition of their job.

Partner note: www.gov.uk/government/publications/high-value-council-tax-surcharge/high-value-council-tax-surcharge

Disclaimer

This article is not intended to be tax advice. Each person's tax circumstances are different; therefore, we recommend that you contact us for personalized tax advice. Sam Niranjan & Co., or Sivasambu Candesamy Niranjan, will not accept any responsibility whatsoever if you make any loss as a result of relying on this article.