In brief:
- In 2025 the Government stated its intention to charge a new mansion tax on residential properties in England valued at over £2m.
- A consultation has now been opened to seek views and further information to be used to draft the details of the legislation required to bring the charges into force.
A new charge on high value properties
We discussed in January the new High Value Council Tax Surcharge (HVCTS) which will be introduced from April 2028. The expected consultation is now underway and covers matters such as how 'owner' should be defined, the proposed support mechanism for those who cannot pay and a proposed list of property level discounts and exemptions.
For buyers of property and existing owners, it seems as though the number of taxes on properties will only increase.
How the HVCTC will apply to complex ownership structures
We mentioned that we need to see how the surcharge applies to properties held through complex ownership structures such as trusts, companies, or partnerships. The consultation indicates that the proposed approach is for the tax to fall on the legal owner of the property, rather than the occupier as is the case with Council Tax.
This would mean that even where the property is held in a bare trust, the legal liability would be on the trustees to pay the tax.
Discounts and Deferrals
The support mechanism for those who cannot pay is likely to include:
- individuals who bought or inherited their home, but who now have lower income, or
- those who experience a temporary change in circumstances such as job loss or ill health.
However, discounts or reductions which are used in the wider Council Tax system will not be replicated for HVCTS.
The consultation also considers the deferral of HVCTS until disposal of the property for owners in respect of their primary residence where they meet specific criteria. Deferral is unlikely to be available in respect of second homes or to companies which own property. The government is considering allowing deferral for a household income threshold of £35,000 and aligning capital savings limits with pension age Council Tax Support, which has a limit of £16,000.
The consultation seeks views on when it might be appropriate to offer a discount to people who own a property, sometimes referred to as tied property, because of their employment. This is to take into account sectors, such as agriculture, where business owners may need to live on the site where their business operates for practical reasons, for example, a farmer may need to own and live in a home located on their farm.
Where you own property or are expecting to inherit property, the merits of succession planning for estates with more assets than cash is becoming even more crucial.
Penalties for non-UK residents
The consultation considers whether there could be a case for applying an additional HVCTS premium to non‑UK resident owners of homes liable for the tax and whether this could affect demand for housing in some high-pressure housing markets.
Valuation
For properties which are significantly improved or changed after the implementation date, for example by adding a large extension, it is likely that they will be revalued and banded at the sooner of either the next revaluation or sale of the property. The stated aim is not to penalise owners who wish to improve or maintain their homes.
This tax will impact groups such as those who have been fortunate enough to invest in properties and seen the price increase.
The consultation is due to complete on 14 July, after which the Government will need some time to analyse the results. We will provide an update once the findings are issued.
Click here for the previous article on the new High Value Council Tax Surcharge for properties in England.