Budget 2025 - High-Value Council Tax Surcharge - the mansion tax

26th November 2025

The government is introducing a new annual surcharge on residential properties worth over £2 million.

Starting from April 2028, owners of homes above £2 million (valued in 2026 prices) will have to pay this surcharge in addition to their existing Council Tax.

The surcharge will follow a banded structure — for example, the lowest surcharge tier applies to properties valued between £2.0 m-£2.5 m, with higher charges for more expensive homes.

According to public-facing media summaries, estimated starting surcharge is around £2,500/year for homes just over £2 m, rising (depending on valuation) for more expensive properties.

The stated purpose is to make highest-value property owners contribute more — currently, property taxes tend to fall disproportionately on lower- and middle-value homes under existing Council Tax bands.

Higher tax on property income / investment / wealth

The Budget raises taxes on "income from assets" — including rental income and returns on property investments — to align with the principle that income from property or other assets should face similar tax burdens as earned income.

From April 2027, new tax-rates for property income will apply: a "property basic rate" of 22%, a “property higher rate” of 42%, and a “property additional rate” of 47%.

The Budget also plans broader changes to wealth- and asset-taxation (for example, reforms to reliefs for business and agricultural property, and to other preferential property-related tax regimes).

No major changes to purchase taxes (Stamp Duty) — but uncertainty continues

According to the formal Budget document, there was no announcement of a change to Stamp Duty Land Tax (SDLT) for typical homebuyers (i.e. the tax on purchasing property was not reformed as part of the 2025 Budget).

Some commentators had speculated about reforming or abolishing SDLT (or replacing it with a recurring property tax), but the Budget did not enact those changes.

What it means for “Normal” Households (and Risks for Future Change)

If you own or are buying a “typical” house under £2 million — likely little immediate change under this Budget. Stamp Duty and Council Tax rules remain broadly the same for most.

If you rent out a property or own a buy-to-let: higher taxes on rent/investment income may cut returns — many landlords may re-assess viability or pass on costs to tenants (potentially affecting rents and the rental market).

For high-value homeowners (especially in pricey regions) — the “mansion tax” adds a significant new cost. It changes the calculus of owning a high-value home: ongoing charges instead of (or in addition to) capital-gains or one-off taxes.

Given that the surcharge starts in 2028 and uses 2026 valuations, there's considerable uncertainty: property valuations could shift, and owners may need to plan for a new, recurring expense.