Rachel Reeves is reportedly considering the implementation of a new council tax surcharge on properties valued above £2 million as part of her upcoming Budget plans. The proposed measure, often referred to as a “mansion tax,” is expected to affect over 100,000 of the most expensive homes.
Initially, there were reports that the Chancellor was aiming for a £1.5 million threshold, impacting around 300,000 households. However, it is now said that the threshold has been raised to £2 million to prevent putting undue financial strain on “asset-rich, cash poor” families.
In England, council tax is categorized into bands determined by property values in April 1991. The Chancellor is reportedly planning to reassess the valuation of approximately 2.4 million homes in the highest bands F, G, and H to identify those subject to the new surcharge.
According to The Times, individuals may have the option to defer payment of the tax until they sell their property or pass away. The Treasury has not confirmed any details regarding the Budget speculation.
Residents in England are currently paying an average Band D council tax of £2,280 for the financial year 2025-2026. Scotland and Wales have different council tax band structures.
The government is seeking feedback on proposals to extend council tax payment periods from ten to twelve months. While households can still opt for ten-month payment schedules, the default could change to twelve months under the new plan.
If households switch to a twelve-month payment plan, the average Band D property could see a monthly reduction of approximately £38, as per data from the Ministry of Housing, Communities and Local Government. The consultation also includes suggestions to slow down the debt collection process for missed council tax payments.
Residents are encouraged to check with their local council about potential council tax discounts. For instance, individuals living alone may be eligible for a 25% reduction, while households where everyone is exempt from paying council tax could receive a 50% discount.
Those receiving benefits or with low incomes should inquire about Council Tax Support or Council Tax Reduction schemes offered by their local authorities. In certain circumstances, individuals may qualify for a complete exemption from council tax obligations.
Lastly, property owners are advised to explore the possibility of challenging their council tax banding. If a property is deemed to be in a higher band than warranted, owners could be entitled to refunds and lower future bills. However, it is crucial to conduct thorough research beforehand, as being placed in a lower council tax band could result in increased future payments.