Chancellor Rachel Reeves has launched a significant new property tax targeting the most expensive homes in England, aiming to address what she calls a "longstanding source of wealth inequality."
What is the New Mansion Tax?
Dubbed a "mansion tax" or officially a "high value council tax surcharge," the new levy will apply to residential properties in England valued at more than £2 million. The policy is designed to ensure that the wealthiest homeowners contribute more.
The surcharge is projected to affect between 100,000 and 200,000 homes. Owners of properties valued between £2 million and £5 million will face an additional annual charge of £2,500. For those owning homes worth £5 million or more, the yearly surcharge rises to £7,500.
How the Surcharge Will Work
Unlike standard council tax, which is paid to local authorities, the revenue from this new surcharge will go directly to the central government Treasury. The move is forecast to raise approximately £400 million each year, with the first full-year revenue of £0.4 billion expected in the 2029/30 financial year.
Ms Reeves highlighted the current disparity in the system during her Budget speech. "Currently, a Band D home in Darlington or Blackpool pays just under £2,400 in council tax… nearly £300 more than a £10m mansion in Mayfair," she stated. "And so from 2028, I am introducing the High Value Council Tax Surcharge in England."
The tax will specifically target properties in the existing council tax bands F, G, and H, which represent the top tiers of the valuation system. The Chancellor confirmed the surcharge would impact fewer than the top 1% of properties in the country.
Background and Reaction
The policy, set to take effect in April 2028, will use property valuations from the Valuation Office based on 2026 prices. The Office for Budget Responsibility (OBR) has outlined that there will be four price bands for the surcharge, starting at £2,500 for the lowest band and capping at £7,500 for the highest.
It was initially reported that the Chancellor considered a lower threshold of £1.5 million, which would have impacted around 300,000 households. However, the threshold was raised to £2 million to avoid penalising "asset-rich, cash poor" families who might struggle with the additional financial burden.
This announcement follows recent analysis from The Institute for Public Policy Research (IPPR), which suggested that reforming property tax could reduce council tax bills for most households while raising funds for public services.
