Rachel Reeves has introduced a tax aimed at properties valued over £2 million in an effort to ensure wealthier individuals contribute their share. This levy, often referred to as a “mansion tax,” is anticipated to impact around 100,000 to 200,000 homes. Properties exceeding £2 million will face an additional annual charge of £2,500, while homes valued over £5 million will incur a £7,500 surcharge.
The implementation of this tax by the Chancellor is projected to generate approximately £400 million annually for the Treasury and is labeled as a “high value council tax surcharge.” Reeves emphasized the need to address wealth inequality in the country, citing discrepancies in council tax payments between different property values.
Starting in 2028, an English High Value Council Tax Surcharge will target properties falling under bands F, G, and H, affecting less than 1% of properties. Unlike standard council tax that supports local council budgets, this new charge will directly benefit the Government.
Council tax in England is categorized into bands established on property values from April 1991. The average Band D council tax for the 2025-2026 financial year stands at £2,280. Scotland and Wales have their own council tax bands separate from those in England.
According to the Office for Budget Responsibility, from April 2028, properties valued over £2 million will face an additional annual charge based on four price bands, ranging from £2,500 to £7,500. Originally proposed at £1.5 million, the threshold was raised to £2 million to avoid negatively impacting families who possess assets but lack liquid funds.
In response to this tax reform, the Institute for Public Policy Research (IPPR) suggests that restructuring property tax could reduce council tax bills for four out of five households. Sarah Nankivell from the Common Wealth think tank welcomes the mansion tax as a step towards fairer taxation for the wealthy but calls for more substantial measures, such as aligning capital gains and dividends tax rates with income tax to rectify the current tax system’s inequities.