In the Autumn 2025 Budget, Chancellor Rachel Reeves announced a new property tax coined “mansion tax” (officially the High Value Council Tax Surcharge, or HVCTS) targeting high-value homes. This will have important legal implications for property owners, buyers and sellers.
What is the new Mansion Tax introduced in the 2025 Budget?
The 2025 Budget introduced a new property tax, officially called the High Value Council Tax Surcharge (HVCTS), often referred to as the “mansion tax.” It targets residential properties in England valued over £2 million, adding an annual levy on top of standard council tax. The surcharge is designed to make high-value homeowners contribute more fairly to public finances and will take effect from April 2028.
Who will the new Mansion Tax surcharge affect?
The surcharge will apply to residential properties in England valued at more than £2 million (based on valuations set in 2026) and will take effect from April 2028. Affected homeowners will pay an annual levy, in addition to their existing council tax.
The surcharge is structured in four bands:
- For properties valued at £2 million to £2.5 million the additional charge will be £2,500 per annum.
- For properties valued at £2.5 million to £3.5 million the additional charge will be £3,500 per annum.
- For properties valued at £3.5 million to £5 million the additional charge will be £5,000 per annum.
- For properties valued at over £5 million the additional charge will be £7,500.00 per annum.
What are the potential future changes to the Mansion Tax?
After initial implementation, the surcharge amounts will be adjusted annually by CPI (Consumer Price Index) inflation. Thresholds will thereafter be reviewed every five years. It is important to note that the surcharge is payable by the owner, not necessarily the occupier. Therefore, if you rent a property worth in excess of £2million the tax is payable by the homeowner and not the tenant. However, we may see rents increasing to cover the homeowner’s costs.
What is the aim of the Mansion Tax?
In her Budget statement, Rachel Reeves maintained the surcharge is intended to correct a longstanding imbalance. Arguing that under the current system, many high-value homes (including multimillion-pound properties) often pay comparable council tax to similar houses in less affluent areas.
The aim of the tax is to ensure that owners of high-value properties contribute more fairly to public finances in part of a broader push to address wealth inequality and make the tax system more progressive.
For many top-end homeowners, this will represent a significant annual cost increase.
What are the implications of the Mansion Tax?
There are several implications which may require planning and advice:
- For Current Owners of High-Value Homes: owners of homes valued above £2 million must budget for the extra annual surcharge from 2028.
- For “asset-rich but cash-poor” owners (e.g. retirees who own expensive properties but have modest income) the surcharge could present a real financial burden. It’s worth reviewing long-term financial plans (e.g. pension income, ability to pay) now, especially where properties may have increased in value significantly since purchase.
- For Those Buying or Selling in the High-Value Market: because the surcharge is based on 2026 valuations, the value band a property falls into may shift by the time the surcharge begins. Buyers and sellers should factor in potential future liability when negotiating price or structuring deals. Some buyers may be deterred by the surcharge, which could affect demand, this is of particular concern for properties around the £2–3 million mark. Sellers should be aware that prospective buyers may renegotiate to offset the future annual surcharge.
- For Estate Planning & Inheritance/Wealth Structuring: for clients with high-value properties, especially those considering inheritance planning, trusts, or long-term housing arrangements, the surcharge adds another dimension to wealth management.
The surcharge will be based on 2026 valuations by the Valuation Office Agency (VOA), and valuations for some high-value homes may be contentious which will lead to valuation appeals. This will inevitably create administrative backlog and uncertainty.
For some homeowners, especially those who bought decades ago, historic valuations may underestimate the current market value meaning unexpected jumps into higher surcharge bands.
The surcharge could distort the high-end property market over time: potential reduction in demand, properties being sold off, “value-bunching” just below the threshold which could create disputes in transactions or valuations.
Why It Matters — And Why Legal Advice Is Crucial
The introduction of the high-value surcharge reflects a major shift in UK property taxation. While the surcharge will only affect a minority of homes (less than the top 1% by value), the financial and legal consequences for those homeowners are substantial.
For existing homeowners, prospective buyers, and estate planners alike, understanding the surcharge, and planning accordingly, is vital. If you own (or are considering purchasing) a high-value property now is the time to consider whether you should take professional legal and financial advice.
Our Final Thoughts on the Mansion Tax
The 2025 “mansion tax” is more than a headline. It is a structural change to how high-value homes are taxed. For those homeowners affected, it may mean significant extra costs and a re-evaluation of long-term property plans. For buyers and sellers, it may influence property values and negotiation strategies
Mansion Tax FAQs
The surcharge applies to residential properties in England valued over £2 million based on 2026 valuations. Homeowners (not tenants) are responsible for paying the annual levy, which ranges from £2,500 to £7,500 depending on property value.
Thornton Jones Solicitors advise that homeowners start reviewing their finances now to prepare for the additional costs.
The High Value Council Tax Surcharge will take effect from April 2028. The tax bands are based on 2026 property valuations, and annual amounts will be adjusted for inflation.
Thornton Jones Solicitors suggest marking this date in your planning calendar and considering professional legal or financial advice well in advance.
Buyers and sellers may need to factor in the surcharge when negotiating property prices, especially for homes around £2–3 million. Estate planning could also be affected, as the surcharge adds costs for inheritance, trusts, and long-term housing arrangements.
Thornton Jones Solicitors advise consulting a legal professional to assess the potential impact on property transactions and wealth planning.
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