Mansion Tax Rumours: What the High Value Council Tax Surcharge Could Mean Before the Budget

PROPERTY & BUDGET WATCH

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With the Budget on 28 October, rumours are circulating about the so-called mansion tax. According to press reports, Chancellor John Healey is looking at whether the threshold for the new surcharge could be lowered. This is speculation, not policy, and the Treasury has said that tax decisions are for the Chancellor to set out at fiscal events rather than commenting on rumour. But the plans already on the table are worth knowing about.

What is already planned

The high value council tax surcharge (HVCTS) was announced at last November’s Budget. The current plan is a new charge of between £2,500 and £7,500 a year on homes valued at more than £2 million, starting from 1 April 2028. It is expected to affect around 165,000 homeowners and raise about £430m a year from 2028-29.

The policy was presented as a response to an unfairness in council tax: under the existing system, the top band does not reflect property values at all. In the then Chancellor’s example, a Band H home in Darlington pays just over £2,400, the same as a £10m mansion in Mayfair.

What the rumour says

•     The threshold could be cut by as much as 25%, which would bring it to around £1.5m.

•     That could capture a further 130,000 property owners, mostly in London and the south-east.

•     The Times described the extension as a “live discussion”, with concerns that it could hit more modest properties.

•     A lower threshold could roughly double the revenue raised.

None of this is confirmed. The Treasury has stressed it will not comment on fiscal policy in the run-up to Budget day.

Where the valuation question comes in

Council tax bands are still based on property values from 1 April 1991, and have never been revalued. Band H covers anything above £320,000. House prices have moved enormously since then; official estimates suggest the average price in London is now more than six times its 1995 level, and about three times in the north-east of England. The Institute for Fiscal Studies has described the current system as increasingly out of date and arbitrary, and ripe for reform.

HMRC and the Valuation Office Agency (VOA) are finalising the detail on how many properties are affected. The VOA has said it will carry out home visits ‘by prior agreement’ where needed to verify valuations, but stressed these would not be routine.

What should property owners do now?

1.      Do not act on rumours. Decisions about selling, gifting or restructuring ownership can have wider tax consequences, so please speak to us before making any move.

2.      Know your property’s value. Keep purchase documents and any recent valuations in one place, in case you need to evidence a value later.

3.      Review your wider position. If you own several properties, hold them through a company or are thinking about your estate, we can look at the whole picture rather than one tax at a time.

4.      Wait for the facts. The final detail, including the threshold, will be clear only after the Budget on 28 October and the legislation that follows.

We will review the Budget announcements as soon as they are made and let you know what they mean for you.

KEY TAKEAWAYS •     The planned surcharge is £2,500 to £7,500 a year on homes over £2m from 1 April 2028. •     A lower threshold of around £1.5m is only a rumour so far. •     Budget Day is 28 October, so avoid acting before the details are confirmed.