Government Opens Consultation on New Tax for Homes Worth £2 million or More

The government has published more detail about its proposed High Value Council Tax Surcharge (HVCTS), which is due to take effect from April 2028. Often referred to as the ‘mansion tax’, the annual charge will apply to residential properties in England valued at £2 million or more. It’ll be paid on top of the property’s existing council tax bill.

The consultation document sets out who may need to pay and how the valuation process could work. It also asks how homeowners should be able to challenge their banding.

The surcharge is expected to apply to fewer than 1% of residential properties in England (around 165,000 homes) and is forecast to raise approximately £430 million a year to support local government funding.

The government has framed the surcharge as addressing an imbalance in the existing council tax system.

‘In the Council Tax system, a band D property in Darlington or Blackpool, today worth around £400,000, pays £2,400 to £2,600 annually. A mansion in Mayfair valued at £10 million in Band H pays around £2,100… Through the HVCTS, those who own the most valuable properties in the country will pay their fair share.’

Ministerial foreword – Steve Reed MP, Secretary of State for Housing, Communities and Local Government and Daniel Tomlinson MP, Exchequer Secretary to the Treasury

What HVCTS charges are being proposed?

Under the proposed bands, the annual charge starts at:

• £2,500 for properties valued between £2 million and £2.5 million
• £3,500 for homes valued between £2.5 million and £3.5 million
• £5,000 for properties valued between £3.5 million and £5 million
• £7,500 for homes worth more than £5 million

The amounts are expected to rise in line with inflation from 2029/30.

It’s not just London: a house liable for the “Mansion Tax” or HVCTS might be less of a mansion than you think

Who will be responsible for paying ‘mansion tax’ on rental properties?

Under the proposals, the property owner will usually pay the surcharge rather than the person living there. Long leaseholders may be responsible where the original lease was granted for more than 21 years. Where a property is held in trust, responsibility generally sits with the trustees.

The government is also consulting on whether non-UK resident owners should pay an additional premium, though hasn’t proposed a rate yet.

The proposed valuation process

The government plans to use 2026 property values to decide which homes fall within each band. The Valuation Office Agency will oversee the process. Automated valuation tools may provide the initial estimate, with professional valuers involved where needed. Comparable sales and the individual features of the property will also be considered.

A draft list of affected properties is expected in late 2027.

Under the proposed appeals process, owners will have an initial eight-month window to challenge their valuation or surcharge band — longer than the standard period, in recognition that this is a new charge. After this transitional period, a standard six-month challenge window will apply for future bandings, in line with existing council tax rules. Properties are then expected to be revalued every five years.

HVCTS support for homeowners with limited income

The consultation recognises that some people may own a valuable home but have a relatively modest income.

Under the proposed deferral scheme, eligible homeowners can delay payment until the property is sold or changes ownership. The deferred amount attracts interest and is secured against the property. Suggested eligibility includes household income of £35,000 or less. Homeowners with savings below £16,000 may also qualify.

What the mansion tax could mean for clients of independent financial planners

Clients with high-value homes may need to account for the annual surcharge when reviewing retirement income and household spending.

The proposed ownership rules may also be relevant where property is held in trust or through a long lease. However, homeowners won’t know their final liability until the valuation process has been completed.

The consultation runs from 19^th May 2026 and closes on 14^th July 2026.

For more information, read HMRC’s High Value Council Tax Surcharge guide

Review how the proposals could affect your plans.