Partner Luke McMath, in our Residential Property team, explains the new “Mansion Tax” Announced in the Autumn Budget.
A new levy, often referred to as the "Mansion Tax," was announced by Chancellor Rachel Reeves in the Autumn Budget on 26 November 2025.
It is an annual surcharge that will be added to existing Council Tax bills for owners of high-value residential properties from April 2028.
How Will the New “Mansion Tax” Work?
The new High Value Council Tax Surcharge (HVCTS) will apply to properties in England valued at over £2 million from April 2028.
Crucially, this new charge will be based on updated valuations to identify properties above the threshold, set to be carried out by the Valuation Office in 2026. These revised valuations will aim to reflect current market rates, rather than relying on outdated purchase prices or the original Council Tax bands introduced in 1991. We do not as yet, though, have the valuation date for this purpose, although it is indicated this will be tied to 2026 prices.
it is important to remember that the tax will be on the property owner rather than the occupier.
What Will the Cost of the High Value Council Tax Surcharge Be?
Under the current proposals, the new annual charge, effective from April 2028, will vary depending on a property's value.
- Properties valued at £2 million to £2.5 million: Owners will pay a £2,500 HVCTS annually, in addition to Council Tax.
- Properties valued at £2.5 million to £3 million: Owners will pay a £3,500 HVCTS annually, in addition to Council Tax.
- Properties valued at £3.5 million to £5 million: Owners will pay a £5,000 HVCTS annually, in addition to Council Tax.
- Properties valued at £5 million and over: Owners will pay a £7,500 HVCTS annually, in addition to Council Tax.
Unlike Council Tax, which normally goes directly to local authorities, this new surcharge will be routed to central government and HM Treasury.
What Will the Impact of the “Mansion Tax” Be?
According to the government, the introduction of a HVCTS is intended to affect less than the top one per cent of properties in the country and it is “asking those owning the highest-value properties to contribute more”.
The Office for Budget Responsibility (OBR) forecasts that the new surcharge will generate an additional £400 million in government income by 2031.
Inevitably, the majority of affected properties are concentrated in London and the South East. Whilst the measure is still subject to consultation, there has been discussion of a deferral scheme that would allow eligible homeowners to postpone payment until a property is sold or they pass away, easing any financial pressure on those who are asset-rich but cash-poor.
We expect it will affect property values at around the £2 million bracket and other thresholds, as it will create a cliff edge in the same manner that Stamp Duty Land Tax (SDLT) once did.
This levy represents arguably the closest the current Labour government has come to introducing a form of "wealth tax," aiming to address the perceived under taxation of multi-million-pound properties and high net worth individuals more generally.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
