How the mansion tax will work and who will be affected

Owners of high-value homes will be hit with a new mansion tax from April 2028 but there are already fears that it could affect more homeowners than expected.

The High Value Council Tax Surcharge, to give it its official name, was presented by former chancellor Rachel Reeves in her 2025 Autumn Budget as a way to “make the council tax system fairer”, said MoneyWeek.

The Treasury says that 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 for a £10 million property in Mayfair, based on the band H charge in the City of Westminster. The government says that “this surcharge will change that”. Here is what you need to know.

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What is the mansion tax?

The levy targets wealth “tied up in property”, while positioning it as “a tool to support public finances”, said property specialists Benham & Reeves.

Under the proposals, properties worth above £2 million will be placed into bands based on their value. Owners of homes worth between £2 million and £2.5 million will pay £2,500 extra council tax per year, rising to £3,500 for homes worth between £2.5 million and £3.5 million, and it will be £5,000 for homes worth £3.5 million to £5 million. Properties worth more than £5 million will incur a charge of £7,500. Charges will increase in line with the consumer prices index inflation rate each year from 2029-30.

How will homes be valued?

Over the next two years, the Valuation Office, an executive agency of HM Revenue & Customs, will be conducting a “targeted valuation exercise” to identify the properties that will be affected, said MoneyWeek. It will use professional valuers and industry-standard automated valuation models to assess sales data and property attributes such as the size, sale price and age of properties.

Information gaps may “pose a problem”, said Transparency International; the price paid for properties is in many cases “incomplete or missing” and in some cases it may be unclear who owns the property.

Homeowners who disagree with the valuation may face a “long and expensive appeals process”, said north London estate agency Maunder Taylor. The Treasury has also indicated there may be exemptions, such as for individuals who bought or inherited their home but who now have a lower income.

How many people will have to pay it?

The high threshold to be eligible for mansion tax means the “vast majority” of homeowners and buyers “won’t be impacted”, said law firm Setfords. Estimates from the Office for Budget Responsibility suggest around 165,000 households will be impacted under the current scope.

But there have been reports that the tax threshold could be lowered to £1.5 million. This would affect another 160,000 homes, said Tax Policy Associates. Such a “controversial move” would “hammer” swathes of homeowners in the capital, said London’s The Standard. The Telegraph estimates that lowering the threshhold would make one in four homes in the capital eligible for mansion tax.

How will it tax impact the housing market?

Properties in London and the South East of England will “bear most of the brunt” of the mansion tax, said the HomeOwners Alliance. It is “unlikely to have a marked impact” on the overall property market, said financial advisers CMS Wealth, but it could push down prices around the mansion tax thresholds. Those looking to avoid the tax may think about downsizing, although stamp duty costs “may make this option prohibitive”.