Rachel Reeves is said to be preparing to introduce a new council tax surcharge on homes with a value exceeding £2 million as part of her budget plan. The proposed measure, often referred to as a “mansion tax,” is expected to affect over 100,000 of the most expensive residential properties.
Initially, there were reports that the Chancellor was considering a £1.5 million threshold, impacting around 300,000 households. However, the threshold has been raised to £2 million to avoid burdening families described as “asset-rich, cash poor.”
In England, council tax is categorized into bands based on property valuations from April 1991. The Chancellor is reportedly contemplating revaluing approximately 2.4 million homes in the highest bands F, G, and H to identify those subject to the proposed surcharge.
According to The Times, individuals may have the option to postpone payment of the tax until they sell their property or pass away. The Treasury has refrained from commenting on any speculations regarding the budget.
Council tax in England is segmented into bands determined by property values from April 1991. The average Band D council tax for the 2025-2026 fiscal year in England is £2,280, with varying bands in Scotland and Wales.
The government is currently seeking feedback on a proposal to extend council tax payments over 12 months instead of the current ten-month period. While households can request to spread payments over 12 months for smaller installments, this may become the default under the new plan.
Households in the average Band D category could potentially save around £38 monthly if payments were spread over 12 months, as per data from the Ministry of Housing, Communities, and Local Government. The consultation also includes suggestions to slow down debt collection processes for missed council tax payments.
Residents are advised to inquire with their local council about eligibility for council tax discounts. Individuals living alone typically qualify for a 25% discount, while households where all members are exempt from council tax payments can receive a 50% reduction.
For those receiving benefits or with low incomes, it is recommended to check if the local authority offers Council Tax Support or Reduction schemes, which could potentially lead to full exemption from council tax payments in certain cases.
Lastly, homeowners are encouraged to investigate the possibility of challenging their council tax banding. Adjusting to a lower band could result in reimbursement and reduced future bills, whereas moving to a higher band may lead to increased payments going forward.