In a significant move to reform England's property tax system, Chancellor Rachel Reeves has used her Budget speech to confirm a new levy on the country's most valuable homes.
The Government plans to introduce a High Value Council Tax Surcharge (HVCTS) targeting owners of residential properties in England valued at £2 million or more, effective from April 2028. This policy, which some are labelling a 'mansion tax', represents the most substantial change to Council Tax in decades.
How the New Property Surcharge Will Work
Critically, the new surcharge will operate completely separately from the existing Council Tax band system, which is still based on 1991 property valuations. The Valuation Office Agency (VOA) will conduct a targeted valuation exercise in 2026 to identify qualifying properties.
Properties identified as being worth £2 million or more will be placed into one of four new HVCTS bands. This assessment will be entirely independent of a property's current Council Tax band (e.g., Band H), meaning a home's existing band will not determine its eligibility for the new charge.
Homeowners, not tenants, will be responsible for paying the surcharge, which will be due in addition to their standard Council Tax bill. The government has confirmed that social housing will be exempt from this new charge.
Aiming for Fairness in Property Taxation
The government estimates that fewer than 1% of properties in England will meet the £2 million threshold. The move is designed to address perceived imbalances in the current system.
The VOA highlighted a stark comparison: the average Band D property in England pays £2,280 annually, which is £250 more per year than a £10 million property in Mayfair pays under Westminster's current Band H charge. This surcharge aims to correct such anomalies.
The HVCTS is projected to raise approximately £430 million per year from 2028/29 onwards, with revenues directed to support local government services. Local authorities will be fully compensated for the administrative costs of collecting the new tax.
Next Steps and Support Schemes
A public consultation on the specifics of the High Value Council Tax Surcharge is scheduled for early 2026. This will cover detailed aspects including the proposed charging structure, reliefs, exemptions, and rules for complex ownership models like companies, trusts, and partnerships.
The Government has also committed to creating a support scheme for those who may struggle to pay the charge, ensuring it is targeted at those most in need. The surcharge amounts will be adjusted in line with CPI inflation each year starting from 2029-30, and property revaluations will occur every five years to keep the system current.
