Rachel Reeves is said to be considering implementing a new council tax surcharge on properties valued above £2 million as part of her upcoming budget plan. Referred to as a “mansion tax,” this proposal would affect over 100,000 of the most expensive homes.
Initially, it was reported that the Chancellor was eyeing a £1.5 million threshold, impacting 300,000 households. However, the threshold has apparently been raised to £2 million to prevent burdening “asset-rich, cash poor” families.
In England, council tax is categorized into bands determined by property values in April 1991. The plan involves reassessing the most expensive band F, G, and H properties—approximately 2.4 million homes—to identify those subject to the surcharge.
According to The Times, individuals may defer payment of the tax until they sell their property or pass away. The Treasury has not officially commented on any budget speculation.
Council tax bands in England are structured based on April 1991 property values. The average Band D council tax for the 2025-2026 financial year in England is £2,280. Scotland and Wales have their own council tax band systems.
The government is presently seeking input on a proposal to extend council tax payment periods from ten to twelve months. While currently optional, under the new scheme, payments over twelve months will become the standard.
Households on average could save about £38 per month by spreading payments over twelve months, as per data from the Ministry of Housing, Communities, and Local Government. However, the option to pay over ten months will still be available. Additionally, the consultation suggests a more lenient debt collection process for missed council tax payments.
Residents are advised to inquire with their local council about potential council tax discounts such as a 25% reduction for single occupants and a 50% discount for households where all members are exempt from paying council tax. Low-income individuals or benefit recipients should explore Council Tax Support or Reduction schemes offered by local authorities, which could lead to substantial bill reductions or exemptions.
Lastly, homeowners are encouraged to assess their council tax band for potential adjustments. If currently in a higher band than warranted, they could be entitled to refunds and lower future bills. Conversely, moving to a lower band without proper research could result in increased future payments.