The Autumn Budget 2025 has introduced a significant new annual charge for owners of high-value properties. From April 2028, the High Value Council Tax Surcharge – widely referred to as the “mansion tax” – will affect homeowners with properties valued at £2 million or more.
What the Chancellor Announced
From April 2028, owners of properties identified as being valued at over £2 million by the Valuation Office (in 2026 prices) will be liable for a recurring annual charge which will be additional to existing council tax. Unlike standard council tax, which goes to local authorities, this surcharge revenue will go directly to the central government.
There will be four price bands with the surcharge rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band, to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year. The measure is estimated to raise £400 million annually by 2031.
The Four Charging Bands
The structure is straightforward, with fixed annual charges based on property value:
- £2 million to £2.5 million: £2,500 annually
- £2.5 million to £3 million: £5,000 annually
- £3 million to £5 million: £6,000 annually
- £5 million and above: £7,500 annually
These charges will increase each year in line with the Consumer Price Index, meaning the real cost will grow over time. For a property valued at £5 million or more, the annual charge will be £7,500 from the outset – potentially exceeding £10,000 within a decade once inflation is factored in.
How Properties Will Be Valued
A ‘targeted valuation exercise’ is expected to be carried out by the Valuation Office in 2026, and it is the 2026 valuations that will be used for the charge two years later, with a similar exercise expected to occur every five years.
This five-yearly revaluation cycle is crucial to understand. As property prices rise, more homes will inevitably cross the £2 million threshold. More properties will inevitably get dragged into the mansion tax net, which means the proportion of terraced houses, flats and semi-detached homes will grow over the years, particularly in the capital.
This isn’t just about grand mansions. In many parts of central London and prime areas of the South East, relatively modest family homes already exceed or approach the £2 million mark.
Who Will Be Affected?
The tax disproportionately affects London and the South East, where property prices are highest. Less than 0.5% of all homes sales agreed this year have been for properties with an asking price of over £2 million, and around 1% of homes for sale are priced above this threshold (Rightmove)
However, this concentration shouldn’t provide comfort. Many Bateman Group clients own property in precisely the areas where values have grown substantially. Properties purchased for £800,000 or £1 million fifteen or twenty years ago may now be valued well above £2 million, purely through market appreciation rather than any improvement or extension.
Planning Considerations for Homeowners
For those approaching the threshold: If your property is currently valued between £1.7 million and £2 million, the 2026 valuation will be critical. Property improvements or extensions completed before this valuation could push you over the threshold, so timing major works requires careful consideration.
For those already above £2 million: The surcharge represents a new ongoing cost that needs factoring into household budgets. For a £3.5 million property, the annual charge of £6,000 adds meaningfully to the cost of home ownership, particularly when combined with already substantial council tax bills.
Insurance and Protection Implications
This new tax doesn’t just affect your property ownership costs – it has implications for your broader financial planning:
Liquidity planning: The surcharge represents a permanent increase in your cost of living. Ensuring adequate income or liquid assets to cover this recurring charge, alongside other property costs, is essential.
Estate planning: The surcharge adds to the total cost of maintaining high-value property, which may influence inheritance planning decisions. Properties that are expensive to maintain and now attract annual surcharges may be less attractive assets to leave to beneficiaries who aren’t in a position to afford the ongoing costs.
Protection needs: If your ability to pay this surcharge depends on continued income, ensuring adequate income protection insurance becomes even more important. Losing income through illness or redundancy becomes more consequential when you have substantial recurring property charges.
Reliefs and Exemptions
The Government has said it will consult on reliefs and exemptions that would apply to this new tax, but no detail has been announced.. The OBR assumed there will be some council tax exemptions and deferrals for people who cannot pay straightaway (Mortgage Solutions)
This suggests there may be provisions for those who are asset-rich but cash-poor – particularly elderly homeowners on modest incomes living in properties that have appreciated substantially. However, until the consultation concludes, the scope of any reliefs remains uncertain.
How Bateman Group Can Help
The High Value Council Tax Surcharge represents a significant change for many of our clients. At Bateman Group, we’re helping affected homeowners understand the implications and plan accordingly.
Our comprehensive approach considers:
- Income protection: Ensuring your ability to meet ongoing property costs is protected against unforeseen circumstances
- Estate planning: Reviewing whether high-value property remains the optimal asset to hold and pass on
- Liquidity management: Ensuring you have adequate accessible funds to meet recurring charges
- Risk management: Reviewing your home insurance and broader protection needs in light of increased property-related costs
With implementation still over two years away, now is the time to review your position and consider your options. For personalised advice on how the High Value Council Tax Surcharge affects your financial planning, contact Bateman Group today. Our team can help you navigate these changes and ensure your wealth protection strategy remains robust in an evolving tax landscape.
