In her Budget speech on Wednesday, Chancellor Rachel Reeves unveiled proposals to impose increased Council Tax rates on high-value properties – what some have labelled the ‘mansion tax’. The Government confirmed that, starting April 2028, it intends to roll out a new High Value Council Tax Surcharge (HVCTS) targeting owners of residential properties in England valued at £2 million or above.
A public consultation regarding the surcharge’s specifics is scheduled for early 2026. On Friday, the Valuation Office (VO) provided clarity on how the scheme will operate.
It confirmed the surcharge would not rely on existing Council Tax bands, which are calculated using 1991 property valuations. For instance, bands F, G and H will not determine whether properties qualify for the surcharge, it said.
It continued: “The Valuation Office Agency will carry out a separate, targeted valuation exercise to determine a property’s value in 2026. If a property is identified as being worth £2 million or more, it will then be placed into one of four HVCTS bands.
“This exercise is separate from, and without reference to, existing Council Tax bands. Council Tax bands will not be used to determine eligibility for the surcharge and will have no bearing on a property’s HVCTS band.
“As this charge is separate from Council Tax, current Council Tax bands will not be affected and will still apply. Equally, a change in Council Tax band will not affect eligibility for the surcharge.”
How new Council Tax bands will work
Homeowners, not tenants, will be responsible for the surcharge and will continue to pay their existing Council Tax in addition to the surcharge. The Valuation Office (VO) has confirmed that social housing will not be affected.
The VO said: “The Valuation Office will conduct a targeted valuation exercise to identify properties above £2 million and therefore in scope. Fewer than 1% of properties in England are expected to be above the £2 million threshold. Revaluations will be conducted every five years.
“Under the current system, the average band D charge for a typical family home across England is £2,280. That is £250 more per year than a £10 million property in Mayfair, based on the band H charge in the City of Westminster, currently pays. This surcharge will change that, implementing a significant reform to improve fairness within England’s property tax system.
“Properties above the £2 million threshold will be placed into bands based on their property value. Charges will increase in line with CPI inflation each year from 2029-30 onwards.”
High Value Council Tax Surcharge charging structure
| Threshold (£m) | Rate (£) |
|---|---|
| £2.0-2.5 | £2,500 |
| £2.5-3.5 | £3,500 |
| £3.5-5.0 | £5,000 |
| £5+ | £7,500 |
The High Value Council Tax Surcharge (HVCTS) will be managed alongside the existing Council Tax by local authorities, who will collect this revenue on behalf of the central government. The VO estimates that the HVCTS will raise around £430 million of revenue per year from 2028/29 to support funding for local government services.
It continued: “Local authorities will be fully compensated for the additional costs of administering this new tax. The Government will undertake a new burdens assessment to ensure costs to local authorities are fully funded.
“The Government will ensure a support scheme is in place for those who may struggle to pay the charge. It is important this scheme is targeted at those who need it most. This will be a key area of consultation in the New Year.
“The Government will also consult on a full set of reliefs and exemptions, as well as proposed rules for more complex ownership structures including companies, funds, trusts and partnerships. The consultation will also cover treatment of those who are required to live in a property as a condition of their job (tied property).”
