Homeowners have been urged to avoid rushing a property decision to try and get ahead of the upcoming Budget. On October 28, Chancellor John Healey will announce his first major fiscal event after being appointed to the role by the Prime Minister Andy Burnham in July.
A High Value Council Tax Surcharge (HVCTS) is set to come into effect from April 2028, starting at £2,500 a year on homes worth £2 million, in addition to the existing Council Tax bill. Reports suggest Mr Healey could drop the threshold to £1.5 million in a bid to raise tax revenue, at a time when the public finances are under strain from high borrowing costs, inflation, and a huge welfare bill.
Concerns Over the 'Mansion Tax' Label
The HVCTS has often been referred to in the press as a "mansion tax", though critics note that, given the exorbitant price of property in parts of the UK, many homes that would be subject to it are far from meeting that description.
Maike Currie, VP Personal Finance at PensionBee says: "Calling it a 'mansion tax' disguises just how many households could ultimately be affected, particularly in London and the South East."
Downsizing Costs to Consider
Selling a home can take longer than you think, with properties often having to remain on the market for months or years before sellers get an offer they're happy with. With the potential for the HVCTS threshold to be lowered, some may be considering downsizing now to rule out additional costs associated with it from spring of 2028.
But PensionBee recommends against selling up for smaller, less valuable digs on the back of Budget rumours alone, flagging costs that you'll have to consider if you sell.
"Selling a valuable home may reduce your exposure to future property taxes and release significant capital, but buying a smaller replacement means paying Stamp Duty and other moving costs," it warned.
"The question is whether the long-term financial and lifestyle benefits outweigh that upfront bill. Remember that downsizing simply moves wealth from property into cash. Sale proceeds from your main home can qualify for temporary FSCS protection of up to £1.4 million for six months, after which the usual £120,000 per person, per authorised firm applies."
It adds that a savings platform "can help spread larger sums across separately authorised banks, making it easier to stay within FSCS limits and secure competitive rates without managing multiple accounts yourself".
Current HVCTS Rates and Valuations
However, it's worth noting that no change to the HVCTS threshold has been confirmed, and it is only reported to be under consideration. Under the legislation as it stands, there are even higher costs for properties valued above £2.5 million, which would be taxed at an annual rate of £3,500.
Meanwhile, properties of between £3.5 million and £5 million would be taxed at £5,000 a year, and those valued at over £5 million would face a £7,500 yearly payment. Valuations will be based on a "combination of automated valuation models and professional valuer judgement", reflecting values as of April 2026, HomeOwners Alliance explains.
