Key points from the High Value Council Tax Surcharge (“Mansion Tax”) consultation

What is being proposed and what are the wider implications?

The Government has launched a consultation on a High Value Council Tax Surcharge (HVCTS) for residential properties in England valued at £2 million or more. The tax only applies to properties in England, not Scotland, Wales or Northern Ireland. Scotland will be introducing in 2028 its own “Mansion Tax “ on properties valued at over £1m. The tax was announced in the November 2025 Budget and is due to start from April 2028.

What is being proposed?

The HVCTS would sit on top of existing Council Tax, rather than replacing it. The Government says the aim is to make the Council Tax system fairer, arguing that some very high-value homes currently pay proportionately less than lower-value homes in other areas. Council Tax is based on property values carried out in 1991.

The surcharge would apply to fewer than 1% of residential properties (approximately 165,000 properties) in England and is expected to raise around £430 million a year for local Government funding. It will apply to the main residence as well as any other residential properties owned such as buy-to- let properties.

Proposed surcharge bands

Properties would be placed into four bands based on their 2026 valuation:

Property value	Annual surcharge
£2m – £2.5m	£2,500
£2.5m – £3.5m	£3,500
£3.5m – £5m	£5,000
Over £5m	£7,500

The charges would increase annually in line with CPI inflation.

Revaluations are proposed every five years, with the next one scheduled for 2033.

Who would pay?

A major feature is that the charge would fall on the owner, not the occupier. The bill would be added to the Council Tax bill and collected by the local Council, however the payment of this tax would go to the Central Government.

It is expected that homeowners in London and the South East would suffer the majority of the tax, with an estimated 50% of all properties in England valued at over £2m located in London and 85% in the South East.

The consultation proposes:

the legal owner (freeholder or leaseholder) is liable
joint owners would be jointly liable
companies owning property would pay
trustees would generally be liable where property is held in trust

Note that companies will potentially be liable to HVCTS (properties valued at £2m plus) as well as ATED (Annual Tax on Enveloped Dwellings), which applies to properties valued at £500,000+.

Leasehold treatment

The Government proposes that leaseholders with leases originally granted for more than 21 years should be treated as liable owners.

This is significant for London and other high-value areas where long leasehold ownership is common.

How would properties be valued?

The Valuation Office Agency (VOA) would carry out a targeted valuation exercise to identify properties within scope of the surcharge, using a combination of comparable sales evidence, automated valuation models (AVMs) and professional valuer oversight.

Property bandings would effectively be based on 2026 property values ahead of the planned 2028 introduction date.

While the consultation proposes a greater use of AVMs to support the valuation process, it makes clear that professional valuers would continue to review decisions, and homeowners would retain the right to challenge valuations where they believe a property has been incorrectly banded.

What if property is part of a trust?

The consultation also includes proposals for how the surcharge would apply to properties held in trust. Under the draft rules, liability for the HVCTS would sit with the trustees as the legal owners of the property, regardless of the type of trust arrangement in place. This differs from the current Council Tax system, where liability generally falls on the occupier.

The Government’s rationale is that taxing the legal owner would simplify administration and collection. However, this could create practical difficulties in some structures, particularly bare trusts and certain life interest trusts, where trustees may legally own the property but not hold sufficient funds within the trust to meet the liability.

Planning will be needed to ensure trustees can access funds to pay the charge, unless the draft rules are changed between now and implementation.

What if you’re unable to pay HVCTS?

Under the consultation, eligible homeowners could defer payment until the property is sold or ownership changes.

Proposed eligibility thresholds

A homeowner could qualify if they have:

household income of £35,000 or less, or
savings/capital of £16,000 or less

The scheme would apply only to a person’s main residence. There could also be additional protection for disability within the deferral scheme.

Key features of the deferral model

The deferred tax would:

accrue interest
be secured against the property
usually become payable on sale or transfer

Note that if a taxpayer passes away, the estate would be liable to pay any unpaid amount including accrued interest. This would reduce the amount available to beneficiaries as the estate would not only suffer Inheritance Tax, but also could have a liability for unpaid HVCTS.

The consultation is also seeking views on what interest rate should apply to deferred HVCTS liabilities.

Are there any exemptions or discounts?

The consultation proposes exemptions or discounts for certain property types, including:

student halls of residence
armed forces accommodation
diplomatic accommodation
social housing
care homes and hospices
domestic abuse refuge accommodation
some unsold new-build developer stock

The Government is also seeking views on properties used as businesses or charitable housing uses.

How would HVCTS be administered and enforced?

Local authorities would administer and collect the surcharge alongside Council Tax.

New penalty regime

Councils could receive stronger powers to identify ownership.

Where owners fail to provide information:

a penalty of 10% of annual HVCTS liability could apply after 21 days
rising to 30% after a further 21 days

This is aimed at complex ownership structures and offshore ownership arrangements.

Could there be a non-UK resident premium on HVCTS?

One of the more notable elements is that the Government is exploring whether to introduce an additional premium for non-UK resident owners of high-value homes.

The consultation does not propose a specific rate yet but asks:

whether such a premium should exist
what the housing market impacts could be

This appears aimed particularly at high-value London property markets as there is “interest in understanding whether demand from non‑UK resident owners may be contributing to pressures on housing availability and prices.”

Can I appeal if my property is within scope of HVCTS?

Homeowners would be able to challenge whether a property falls within scope of the surcharge, its valuation band, liability for the charge, and the application of any discounts or deferrals, with appeals ultimately heard by the Valuation Tribunal for England.

The consultation also proposes earlier sharing of valuation evidence, publication of a draft list of properties in late 2027, and an initial eight-month challenge window following the launch of the regime.

What are the wider implications of HVCTS?

Beyond the technical detail, the consultation raises wider questions around the future direction of property taxation in the UK. While the Government has positioned the surcharge as a way of addressing perceived inequities within the Council Tax system, raising additional revenue from higher-value properties and supporting local authority finances, the proposals could have a significant impact on a range of taxpayers, particularly in London and the South East. This includes long leaseholders, non-resident investors, trustees and estate structures, as well as individuals who may own high-value inherited properties but have comparatively modest income levels.

The consultation also highlights the scale of administration required to implement the regime, including a substantial valuation exercise, new local authority systems, expanded enforcement powers and increased data sharing between councils, HMRC and HM Land Registry.

At the same time, some are likely to question whether the proposals add further pressure to an already heavily taxed area of the UK economy, particularly given ongoing debate around the treatment of internationally mobile wealth, concerns over valuation disputes and the practical challenges facing asset-rich but income-poor homeowners.

Key dates of HVCTS

Date	Event
19 May 2026	Consultation launched
14 July 2026	Consultation closes
Late 2027	Draft property list published
March 2028	First bills issued

The HVCTS consultation is open until 14 July 2026. Responses to the consultation can be submitted via the Government’s website, via email or in writing.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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