The 2028 Mansion Tax
A feature of recent Budgets is the announcement of tax changes that are deferred for several years. The changes to IHT on business and pensions are a good example. So too is another directed at wealth: the high value council tax surcharge (HVCTS), aka mansion tax.
Full details still awaited…
The Autumn 2025 Budget announced that the new tax would come into effect from April 2028, for properties valued at least £2 million in 2026 (with no specific date given). Despite the reference to council tax in the name, HVCTS will go into the government’s coffers, with council involvement limited to collecting the new tax alongside council tax and passing it on. A consultation document was promised ‘early in 2026’, but by mid-April none had arrived. However, we do know the rates:
OBR insight
The lack of consultation did not stop the OBR from publishing its thoughts on the impact of the new tax, which included:
By 2028, the capitalised value of the surcharge would be fully reflected in property prices. This would imply a reduction of about £35,000 per £1,000 of surcharge, based on the OBR’s assumed inflation rate of 2% and a discount rate of 5%.
Prices will bunch just under the various HVCTS thresholds, just as happened when the stamp duty rate was based on property values. There is already anecdotal evidence that this is happening.
The band structure will encourage valuation appeals, which the OBR expects will apply to 20% of properties initially deemed liable. Four in ten of those appeals are forecast to succeed.
The revenue raised by the HVCTS will be partially offset by lower stamp duty, capital gains tax and IHT because of reduced property values.
Action
If you are moving to or from a ‘mansion’ – which could be a modest apartment in some parts of London – the HVCTS needs to be factored into your calculations.
There are no obvious ways to avoid this tax, other than making sure your mansion is worth less than £2 million.
This article was prepared by Chris Green, our Head of Financial Planning. We always appreciate your feedback. If you have enjoyed this article or have any specific topics you would like to see addressed in future newsletters, please email us at FPTeam@city-asset.co.uk.