Chancellor Rachel Reeves is preparing to unveil a new council tax surcharge on the UK's most expensive homes as a central part of her upcoming Budget. This proposed levy, already being termed a 'mansion tax', is expected to impact over 100,000 households living in properties valued above £2 million.
What the new 'Mansion Tax' entails
Reports indicate that the Treasury initially considered a lower threshold of £1.5 million, which would have drawn an estimated 300,000 properties into the surcharge net. However, the Chancellor is said to have raised the bar to £2 million to shield 'asset-rich, cash poor' families from the additional financial pressure.
To determine which homes will be subject to the new charge, the government is planning a significant revaluation exercise. This process will target 2.4 million properties currently in the highest council tax bands - F, G, and H. A key feature of the proposed scheme, as reported by The Times, is a provision allowing homeowners to defer payment of the surcharge until they either sell the property or pass away. The Treasury has maintained its standard position of not commenting on Budget speculation.
Understanding your current council tax band
Council tax in England is calculated based on a property's assessed value as it stood on 1 April 1991, not its current market price. The system divides properties into bands from A to H.
- Band A: up to £40,000
- Band B: £40,001 to £52,000
- Band C: £52,001 to £68,000
- Band D: £68,001 to £88,000
- Band E: £88,001 to £120,000
- Band F: £120,001 to £160,000
- Band G: £160,001 to £320,000
- Band H: more than £320,000
For the 2025-2026 financial year, the average Band D council tax bill in England is set at £2,280. It is important to note that Scotland and Wales operate their own distinct council tax band systems.
Other changes and how to reduce your bill
Separate from the surcharge proposal, the government is consulting on a plan to make 12-month council tax payments the default for all households, replacing the current standard ten-month collection cycle. For an average Band D household, this change would mean monthly payments of approximately £38 less, though the option to pay over ten months would remain. The consultation also proposes slowing down the debt collection process for missed payments.
There are several established ways to potentially lower your council tax bill:
- Apply for a discount: If you live alone, you are entitled to a 25% single person discount. A 50% discount applies if every resident in a household is 'disregarded' for council tax purposes.
- Check for Council Tax Support: Those on a low income or claiming benefits should enquire with their local authority about a Council Tax Reduction scheme, which can sometimes cover up to 100% of the bill.
- Challenge your band: If you believe your property is in too high a council tax band, you can challenge it. Be aware that this process carries a risk, as your band could be moved up, not down, resulting in higher future payments.
