London, November 28, 2025
Owners of residential properties valued above £2 million in England will face a new council tax surcharge, commonly referred to as a “mansion tax,” beginning April 2028. The levy aims to increase government revenue from high-value property owners as part of wider tax reforms introduced in the Autumn Budget 2025.
Properties valued between £2 million and £2.5 million will incur a surcharge of £2,500, with higher bands applying increasingly larger fixed surcharges. The tax caps at £7,500 annually for properties valued over £5 million. This surcharge replaces an earlier proposal that suggested a 1% proportional tax on property values exceeding £2 million.
This tax is imposed on property owners rather than occupants, meaning owner liability applies even if the home is vacant or rented. The measure specifically targets owners of high-value residential assets across England.
The mansion tax forms part of broader real estate tax reforms announced in late 2025. These include changes to business rates for expensive properties and an increase in income tax on property rental earnings effective from April 2027. Together, these reforms reflect a government intent to raise greater revenue from wealthier individuals with substantial property holdings.
Market reactions are expected, particularly around the £2 million threshold. Some sellers may reduce asking prices just below this mark to avoid the surcharge, potentially exerting downward pressure on prices for properties just exceeding the limit. Such anticipations echo previous market behaviour seen around Stamp Duty tax bands.
London and other areas with high property values are predicted to feel the impact most acutely given the concentration of homes valued above the surcharge threshold. This could modestly reshape market dynamics in these regions.
The government has indicated it will publish a consultation early in 2026 addressing potential reliefs, exemptions, and how the tax will apply to properties held via Special Purpose Vehicles (SPVs). These forthcoming rules will clarify implementation details and address complex ownership structures often used in high-value property investment.
This mansion tax represents a strategic adjustment in the UK’s property taxation framework, targeting wealthy homeowners with the goal of delivering additional fiscal resources while influencing luxury real estate market behaviour. Its introduction signals continued prioritisation of wealth tax reforms in the government’s broader economic policy agenda.