The Mansion Tax Timebomb:
How New Valuations Could Devalue Your Home and Push Up Your Tax Bill

The 2025 Autumn Budget introduced a new High Value Council Tax Surcharge — informally known as a “mansion tax” — aimed at homes in England valued at £2 million and above, with the charge set to take effect from April 2028. This annual levy, applied on top of existing council tax, will be based on 2026 valuations of high-value homes and is expected to raise significant revenue and influence high-end property values and mortgage affordability.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

What The High Value Council Tax Surcharge Actually Is

The High Value Council Tax Surcharge (HVCTS) applies to residential properties in England with a market value of £2 million or more based on 2026 valuations, with the charge collected alongside regular council tax from April 2028.

Under government guidance, properties above this threshold will be placed into four surcharge bands:

• £2.0m–£2.5m: £2,500 per year

• £2.5m–£3.5m: £3,500 per year

• £3.5m–£5m: £5,000 per year

• £5m+: £7,500 per year

The surcharge is expected to be incurred by fewer than 1 % of properties in England, with most affected homes concentrated in London and the South East.

Why Valuations Matter So Much

Council tax valuations in England have not been reset since 1991, despite decades of divergent house price growth.

Under the new regime, updated valuations for 2026 will determine who falls into high-value surcharge bands. Property valuation matters because even modest adjustments around thresholds can shift a home into a higher surcharge band, creating significant additional annual costs for owners and affecting perceived property value.

The specific valuation methodology — whether based on recent comparable sales, digital property records, automated models or individual assessments — will be key to accuracy and fairness, and the government has confirmed that the Valuation Office Agency is developing its approach ahead of full implementation.

How Higher Annual Property Costs Affect Mortgages

Mortgage lenders factor council tax into affordability assessments as a committed expenditure. Higher annual property-related taxes directly reduce the disposable income available to service mortgage payments, which can lower the maximum loan a borrower can access, all else being equal.

For remortgaging, a higher valuation may not immediately increase borrowing capacity if the ongoing tax burden dampens affordability. In markets where valuation uncertainty rises, lenders may take a more cautious approach to valuation, further affecting remortgage options.

Implications For Property Prices And Market Dynamics

Economic analysis suggests that annual property taxes can have a dampening effect on house prices near surcharge band cut-offs, as buyers discount offers to offset future tax costs. Independent tax specialists have estimated this could translate into around a 2.5 % reduction in property value for homes subject to the surcharge — equivalent to around £50,000 on a £2 million home — with potentially larger impacts at higher price points.

Less liquid markets and prolonged buyer uncertainty during the valuation and implementation process could further depress sales volumes and pricing at the upper end of the market.

Who Is Most Affected By The Surcharge?

The surcharge affects owners, not occupiers, meaning landlords of high-value Buy-to-Let properties will also be liable.

Homes in prime London boroughs and affluent commuter belt areas are most likely to fall above the £2 million valuation threshold, but values vary widely. In some cases, properties that were historically family homes rather than “mansions” in the traditional sense will trigger the surcharge under modern market values.

Owners who have held properties for long periods — especially those who bought decades ago — may find themselves subject to sizeable annual charges despite modest income or retirement status.

Policy Objectives And Criticisms

The government’s stated aim for the surcharge is to improve fairness in the council tax system by ensuring high-value homes contribute more in property tax, addressing disparities where a typical Band D property may currently pay more council tax than a multimillion-pound home.

However, there is criticism that updating valuations and introducing this surcharge could create market distortions, administrative burdens, and additional costs for owners who are asset-rich but income-poor. Concerns also include whether consultation and appeal mechanisms around valuations will be sufficient to handle disputes.

Key Numbers To Watch

High Value Council Tax Surcharge implementation: April 2028 (based on 2026 valuations)
Surcharge bands: £2,500 to £7,500 per annum depending on value
Estimated revenue: Around £400 million annually by 2029-30
Affected properties: Less than 1 % of homes in England

Figures as of December 18 2025, London.

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One, we can explain your options and timings based on your specific circumstances.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

FAQs

1) What is the High Value Council Tax Surcharge (“mansion tax”)?
It is an annual additional tax on residential properties in England valued at over £2 million, collected alongside existing council tax from April 2028.

2) How much will the surcharge cost?
Annual costs range from £2,500 for properties worth £2 million–£2.5 million, up to £7,500 for homes worth £5 million or more, adjusted annually by inflation.

3) How will valuations be conducted?
The Valuation Office Agency is developing its approach, which may combine recent sales data, digital records and automated valuation tools.

4) Will this affect mortgage affordability?
Yes. Higher annual tax bills count as committed costs in affordability assessments, which can reduce borrowing capacity.

5) How many homes are expected to be affected?
Fewer than 1 % of residential properties in England are predicted to be valued above £2 million and subject to the surcharge.