For years, the idea of a “mansion tax” has floated around UK politics – a shorthand for an extra charge on owners of high-value homes. With pressure on the Chancellor Rachel Reeves to raise taxes, the idea of a pure wealth tax has proven increasingly popular in recent months.
While the government have ignored calls for a pure wealth tax, the mansion tax introduced in the 2025 Autumn Budget sees the introduction of a new levy on expensive residential properties. Some have argued that this has a similar effect.
The Government avoids the phrase mansion tax, preferring the official name High Value Council Tax Surcharge (HVCTS). But what actually is the mansion tax? Well, at its core level, it’s an annual additional charge on properties worth over £2 million.
Below, we break down what the mansion tax means, how it will work, and what homeowners should expect.
A Simple Explanation: What Is the Mansion Tax?
At its core, the mansion tax is an extra annual charge applied on top of the usual council tax for very high-value homes.
Instead of changing the existing council tax bands – which are based on 1991 values and have long been criticised as outdated – the Government has opted for a new surcharge that only affects the most expensive residential properties.
So, if you own a home worth more than £2 million (based on new valuations to be carried out in 2026), you will pay your normal council tax plus this additional amount each year.
Who will pay the mansion tax?
The surcharge applies to all residential properties in England valued at more than £2 million. This threshold is assessed through a large-scale valuation exercise by the Valuation Office Agency in 2026.
Only a very small proportion of homes fall into this category – roughly 0.5% to 1% of properties, most of them in London and the South East.
These amounts will rise each year from 2029/30 in line with inflation.
When does the mansion tax come in to force?
The new charge will begin in April 2028, giving time for the national valuation exercise and for the appeals system to be set up.
Why is the Government introducing the mansion tax?
The Budget frames the surcharge as a matter of fairness. According to ministers, many ordinary households pay a higher proportion of council tax relative to property value than owners of multi-million-pound homes. The mansion tax is intended to reduce this imbalance without overhauling the entire council tax system.
The measure is also expected to raise over £400 million per year, contributing to wider Budget plans to strengthen public finances.
What if I’m buying or already own a property worth £2m or more?
With the surcharge set to come into force in April 2028, it is likely that you will be affected by the mansion tax.
As a result, you will have to pay an annual tax with the minimum amount being £2,500, and the highest you will be asked to pay being £7,500.
How much will the mansion tax cost me?
The surcharge is tiered according to property value:
- £2.0m–£2.5m: £2,500 per year
- £2.5m–£3.5m: £3,500 per year
- £3.5m–£5m: £5,000 per year
- £5m+ : £7,500 per year
Will This Affect the Property Market?
The introduction of a mansion tax could have several practical impacts:
- Valuation disputes: Expect a high volume of appeals once the 2026 valuations are released, especially for properties near the £2m threshold.
- Market behaviour: Homes just above the £2m level may see pressure on pricing as buyers seek to avoid crossing the boundary.
- Cash-poor owners: Long-term residents of high-value homes – such as older owners – may find the new annual cost challenging.
For most buyers and homeowners, however, the surcharge will have no effect whatsoever.
Conclusion
The 2025 Budget marks the first time a UK government has introduced a genuine, nationwide “mansion tax”. While officially labelled the High Value Council Tax Surcharge, its purpose is clear: to make owners of the most expensive homes contribute more each year, while leaving the wider council tax system untouched.
For owners of high-value properties – or buyers considering a purchase in the £2m+ market – understanding this new charge will be an important part of future tax planning. Contact Lisa’s Law’s expert conveyancing team for more information.
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