Wealth, Not Walls’ Labour Reportedly Weighs Targeted Property Levy on Homes >£2m, Starting 2028
Wealth, Not Walls Tens of thousands of homeowners in England with properties valued above £2m will be required to pay a new annual surcharge from 2028, in what is already being widely described as a mansion tax.
The charge, which will apply in addition to existing council tax bills, will start at £2,500 a year and rise through four bands based on property value. Homes valued at £5m or more will face the top rate of £7,500. Government figures suggest most of the properties affected are located in London.
The Office for Budget Responsibility (OBR) estimates that the surcharge will generate around £400m a year by 2029 to 2030.
A key part of Reeves’s tax rises
The High Value Council Tax Surcharge forms part of a broader package of tax increases introduced by Chancellor Rachel Reeves as she seeks to meet her own fiscal rules and address what she called a longstanding imbalance in national wealth.
Announcing the measure, Reeves said she was taking “further steps to deal with a longstanding source of wealth inequality in our country”.
However, the Institute for Fiscal Studies (IFS) criticised the measure for not going far enough. The organisation has repeatedly argued that a full revaluation of council tax bands is “long overdue” and said that although there is a case for taxing high value homes more heavily, the design of this new surcharge “leaves much to be desired”.
Less than 1 percent of homes affected
The Treasury estimates that fewer than 1 percent of properties in England will fall within the new bands.
Estate agent Savills described the surcharge as “probably the least worst outcome for owners of prime property”, noting that it would be far less disruptive than a fully open-ended mansion tax. The firm suggested that clarity on the issue might even give the prime housing market a short-term boost and could encourage older homeowners to consider downsizing.
The Local Government Association urged the government to involve councils closely in the design of the scheme. It warned that confusion may arise if residents mistakenly believe the surcharge is a council tax decision rather than a Treasury measure.
Cllr Pete Marland, chair of the association’s resources committee, said any revenue raised through council tax mechanisms should be directed to councils to support local services. He added that councils would “wait to see” how the government intends to use the funds.
How the surcharge will work
Annual surcharge bands:
- Properties valued from £2m to £2.5m will pay £2,500
- Properties valued from £2.5m to £3.5m will pay £3,500
- Properties valued from £3.5m to £5m will pay £5,000
- Properties valued above £5m will pay £7,500
Although added to council tax bills, the revenue will go directly to the Treasury.
The OBR expects the charge to begin influencing property valuations, warning that “price bunching” just below band thresholds is likely as buyers and sellers seek to avoid triggering higher surcharges. This behaviour is expected to reduce overall revenues by limiting the number of properties falling within each band.
The thresholds themselves will rise with inflation.
Read More: Millions to pay more tax as Reeves defends £26bn Budget
Valuations and exemptions still under consultation
Properties will be assessed using 2026 valuations from the government’s Valuation Office Agency. Council tax bands themselves will not change, but properties in bands F, G and H will be checked to determine whether they sit above the £2m threshold.
The government will launch a consultation on what exemptions or reliefs should apply. This may include provisions for people required to occupy high value properties as part of their employment.
The announcement comes amid renewed calls for a full overhaul of the council tax system, which still relies on property valuations from 1991.
