The UK government is to introduce an annual council tax surcharge on residential properties in England valued at £2m or more, in a move that revives the politically charged idea of a “mansion tax”.
Under plans confirmed in last month’s Budget by Chancellor Rachel Reeves, the Valuation Office Agency will conduct a fresh assessment of property values in 2026. Homes will then be placed into one of four new high-value bands, with owners facing additional annual charges ranging from £2,500 for properties worth £2m–£2.5m to £7,500 for those valued at £5m and above. The surcharge will take effect from April 2028 and will be levied on top of existing council tax bills.
The measure is expected to affect several tens of thousands of households, concentrated predominantly in London and the south-east, where high property prices mean even relatively modest homes can exceed the £2m threshold.
Ms Reeves described the policy as “further steps to deal with a longstanding source of wealth inequality in our country”. The revenue raised – projected by the Office for Budget Responsibility to be modest in the context of overall public finances – will help the Treasury meet its fiscal rules while avoiding deeper cuts to public spending or broader tax increases.
Critics, including the Institute for Fiscal Studies, have argued that the reform does not go far enough. The IFS has long called for a comprehensive revaluation of all council tax bands – unchanged in England since 1991 – and a shift towards a more progressive structure. The think-tank noted that the new surcharge, while welcome, leaves the underlying regressive nature of the council tax system largely untouched.
Property industry figures warned that the levy could deter foreign investment in prime London real estate and prompt some high-net-worth individuals to reconsider their UK residency status. Supporters, however, argue that owners of multi-million-pound homes are well placed to absorb the additional cost.
The introduction of the surcharge marks the latest attempt by a Labour government to target wealth held in high-value property, following earlier proposals under Ed Miliband that were abandoned before the 2015 election amid fierce opposition.
Separate reforms to non-domiciled tax status and the abolition of the inheritance tax exemption for certain pension pots have already heightened scrutiny of the UK’s attractiveness to internationally mobile wealth.
