Breakdown of new Council Tax bands confirmed after Budget announcement | Personal Finance | Finance
In her Budget speech on Wednesday, Chancellor Rachel Reeves announced proposals to impose increased Council Tax rates on high-value properties, which some have dubbed a ‘mansion tax’. The government has confirmed that it plans to introduce a new High Value Council Tax Surcharge (HVCTS) from April 2028, targeting homeowners worth £2 million or more in England.
A public consultation on the details of the surcharge is planned for early 2026. On Friday, the Valuation Office (VO) provided clarity on how the scheme would work.
He confirmed the surcharge would not be based on existing Council Tax ranges calculated using 1991 property valuations. For example, bands F, G and H will not determine whether properties qualify for the surcharge, he said.
He continued: “The Valuation Office Agency will carry out a separate, targeted valuation exercise to determine the value of a property in 2026. If a property is determined to be worth £2 million or more, it will be placed in one of four HVCTS bands.
“This application is separate from and does not refer to existing Council Tax ranges. Council Tax ranges will not be used to determine eligibility for the surcharge and will have no impact on a property’s HVCTS band.
“As this charge is separate from Council Tax, existing Council Tax bands will not be affected and will continue to apply. Likewise, a change in Council Tax band will not affect eligibility for the surcharge.”
How will the new Council Tax bands work?
Landlords, not tenants, will be responsible for the surcharge and will continue to pay existing Council Tax on top of the surcharge. The Valuation Office (VO) confirmed that social housing will not be affected.
VO said: “The Valuation Office will carry out a targeted valuation exercise to identify properties over £2 million and therefore within scope. Less than 1% of properties in England are expected to be above the £2 million threshold. Revaluations will take place every five years.”
“Under the current system, the average band D charge for a typical family home across England is £2,280. This is £250 more per year than what a £10 million property in Mayfair currently pays, compared to the band H charge in the City of Westminster. This surcharge will change this by implementing significant reform to improve fairness in England’s property tax system.
“Properties above the £2 million threshold will be placed in bands based on property values. Fees will rise in line with CPI inflation each year from 2029-30.”
High Value Council Tax Surcharge payment structure
| Threshold (£m) | Rate (£) |
|---|---|
| £2.0-2.5 | £2,500 |
| £2.5-3.5 | £3,500 |
| £3.5-5.0 | £5,000 |
| £5+ | £7,500 |
The High Value Council Tax Surcharge (HVCTS) will be administered alongside existing Council Tax by local authorities, who will collect this revenue on behalf of central government. VO estimates HVCTS will generate revenues of around £430 million per year from 2028/29 to support funding for local government services.
He continued: “Local authorities will be fully compensated for the additional costs resulting from the implementation of this new tax. The government will undertake a new burden assessment to ensure that costs to local authorities are fully funded.”
“The government will ensure that a support plan is in place for those struggling to pay. It is important that this program targets those who need it most. This will be an important area of consultation in the New Year.
“The Government will also consult on a full range of exemptions and exemptions, as well as proposed rules for more complex ownership structures including companies, funds, trusts and partnerships. The consultation will also cover the treatment of people who are required to live in a property as a condition of their employment (captive property).”
