Rachel Reeves has introduced a tax targeting homes valued above £2 million to ensure wealthier individuals contribute their share. Dubbed the “mansion tax,” it is anticipated to affect 100,000 to 200,000 properties, with an additional cost of £2,500 for homes exceeding £2 million and £7,500 annually for those valued over £5 million.
The proposed measure by the Chancellor aims to generate approximately £400 million annually for the Treasury, starting in 2029/30, under the label of a “high value council tax surcharge.” Reeves emphasized addressing wealth inequality as a key focus in the current Budget.
Starting from 2028, the High Value Council Tax Surcharge will be implemented in England, targeting properties falling in bands F, G, and H. The surcharge will impact less than 1% of properties, with the revenue directed to the government instead of local council budgets.
Council tax in England is categorized into bands based on property values in April 1991. The average Band D council tax for 2025-2026 in England stands at £2,280. Wales and Scotland have their own council tax band structures.
As outlined by the Office for Budget Responsibility, properties valued at over £2 million will face an additional annual charge starting in April 2028. The surcharge will vary based on four price bands, ranging from £2,500 to £7,500 for properties valued at £2 million to over £5 million.
Initially considering a £1.5 million threshold affecting 300,000 households, the Chancellor raised the threshold to £2 million to prevent undue strain on “asset-rich, cash poor” families. The Institute for Public Policy Research (IPPR) suggests that property tax reform could reduce council tax bills for 80% of households, providing funding for essential public services.
In response, Sarah Nankivell from the Common Wealth think tank welcomed the mansion tax but called for more substantial tax reforms, including equalizing capital gains and dividends tax rates with income tax rates.