From April 2028, a brand-new annual charge called the High Value Council Tax Surcharge (HVCTS) will apply to residential properties in England valued at £2 million or more. Announced by Chancellor Rachel Reeves at the Autumn Budget 2025 on 26 November 2025, the surcharge is widely referred to as the mansion tax and represents the most significant reform to domestic property taxation since the current Council Tax system was introduced in 1993.
What Is the High Value Council Tax Surcharge?
The HVCTS is an additional annual levy charged on top of existing Council Tax. It applies to the owner of the property, not the occupier or tenant. This is a fundamental distinction: unlike standard Council Tax, where tenants are typically liable, the HVCTS falls entirely on the legal owner, whether that is an individual, a company, a trustee, or a joint owner.
The government introduced the surcharge to address a long-standing anomaly in the Council Tax system. Under the current banding structure, anchored to 1991 property values, the average band D family home in England pays £2,280 per year in Council Tax. A £10 million property in Mayfair, sitting in band H in Westminster, currently pays £250 less annually than that average family home. The HVCTS directly addresses that imbalance.
The surcharge is expected to affect approximately 145,000 to 165,000 homeowners across England, representing fewer than 1% of all properties.
Who Is Liable to Pay?
Liability rests with the legal owner of the property. This includes:
- Freeholders and long leaseholders with leases of more than 21 years
- Companies holding residential property in their own name
- Trustees where property is held within a trust structure
- Joint owners, on a joint and several basis
For landlords, this means the surcharge is your responsibility regardless of whether you have a tenant in the property. You cannot pass the HVCTS charge to a tenant through the standard Council Tax billing arrangement. Social housing is explicitly excluded from scope.
The consultation published in May 2026 also explores whether an additional premium might apply to non-UK resident owners, though this has not yet been confirmed in law.
The Charging Bands
Properties above the £2 million threshold will be placed into one of four annual charge bands based on their assessed 2026 market value.
| Property Value (2026) | Annual Surcharge |
|---|---|
| £2.0 million to £2.5 million | £2,500 |
| £2.5 million to £3.5 million | £3,500 |
| £3.5 million to £5.0 million | £5,000 |
| Over £5.0 million | £7,500 |
From April 2029, all rates will increase annually in line with the Consumer Prices Index (CPI). The surcharge will be collected by local authorities alongside existing Council Tax bills, but the revenue will flow to central government rather than local budgets, raising an estimated £430 million per year from 2028 to 2029 onwards.
How Properties Will Be Valued
The Valuation Office Agency (VOA) is conducting a targeted valuation exercise throughout 2026 to identify all properties in England valued at £2 million or more. The 2026 market value forms the basis for the surcharge from April 2028, and revaluations will take place every five years thereafter, with the next expected in 2033.
A critical point for owners is that the HVCTS threshold is entirely separate from existing Council Tax bands. A property in band H based on 1991 values is not automatically in scope. A modest flat in a high-growth London borough could be caught, while a larger property in a lower-growth region may fall below the £2 million mark.
Owners who disagree with the VOA’s assessment will have a right to challenge the valuation. Appeals will be heard by the Valuation Tribunal for England.
Exemptions and the Deferral Scheme
The government is consulting on a targeted set of exemptions. Confirmed exclusions at this stage include social housing, student accommodation, armed forces and diplomatic housing, properties used for care or refuge, and new build properties held by developers until the earlier of first sale or twelve months after completion.
A deferral scheme is proposed for eligible individuals who are unable to pay. Under current proposals, deferral is available where the property is the owner’s main residence, household income is £35,000 or less, and capital savings are £16,000 or less. Deferred amounts will accrue interest and be secured against the property as a charge on the title.
The consultation, which opened on 19 May 2026 and runs until 14 July 2026, also covers complex ownership structures including companies, funds, trusts, and partnerships.
What Property Owners Should Do Now
Although the surcharge does not take effect until April 2028, 2026 is the critical year. The VOA is conducting valuations now, meaning the values assessed this year will determine your liability for the next five years.
Practical steps to take before the surcharge takes effect include:
- Assess whether your property or any property in your portfolio is likely to exceed the £2 million threshold based on current market value
- Obtain a professional RICS valuation if you are close to any of the four band thresholds, as falling into a higher band increases the annual charge by £1,000 to £2,500
- Review how your properties are held, as ownership structure will determine liability and eligibility for any forthcoming reliefs
- Build the recurring annual charge into your cash flow forecasts and rental yield calculations
- Monitor the consultation outcome for confirmed reliefs, exemptions, and rules on complex structures
How UK Property Tax Accountants Can Help
For landlords and property owners with high-value assets, the HVCTS introduces a new recurring overhead that sits outside the standard Self Assessment and Corporation Tax framework. Assessing your exposure, understanding how ownership structure affects liability, and factoring in the interaction with Inheritance Tax, Capital Gains Tax, and ATED requires specialist property tax advice.
UK Property Tax Accountants can review your entire portfolio to identify which properties fall within or near the £2 million threshold, advise on whether restructuring ownership before April 2028 reduces your long-term liability, and ensure you are positioned to benefit from any reliefs or exemptions confirmed after the July 2026 consultation closes. With valuations being set in 2026 for the next five years, taking action now rather than in 2028 gives property owners the greatest flexibility to plan effectively.
Frequently Asked Questions
Does the HVCTS replace my existing Council Tax?
No. The surcharge is an additional charge on top of your existing Council Tax bill. Both remain payable.
Does the HVCTS apply in Scotland, Wales, or Northern Ireland?
No. Property taxes are a devolved matter. The HVCTS applies only in England. Devolved governments may choose to introduce similar measures independently.
Will a company-owned property be caught?
Yes. Companies holding residential property are expected to be within scope unless a specific exemption applies after the consultation is finalised.
Can I challenge the VOA valuation?
Yes. A formal appeals process is being established and challenges will be heard by the Valuation Tribunal for England.
When will the VOA contact me?
The VOA valuation exercise is already underway in 2026. Owners do not need to register; the VOA will identify properties using sales data, automated valuation models, and comparable evidence.
What happens if I cannot afford to pay?
A deferral scheme is proposed for main residence owners with household income below £35,000 and savings below £16,000. Deferred amounts accrue interest and are secured against the property.
