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The High Value Council Tax Surcharge (HVCTS) or mansion tax was one of many measures introduced during the Autumn Budget at the end of November. It has caused concern for property owners in regions with high average property prices, as well as for landlords, investors and other real estate professionals.
While the intention is for the surcharge to be collected by local councils in the same way as council tax from April 2028, applied to the owners, rather than occupiers, of all UK properties worth £2 million or more, a public consultation has been planned for early this year.
There is much debate about how this scale of property taxation reform will be implemented in time, but in the interim those with high-value residences and investment properties are also dealing with a 2% increase to property income taxes from April 2027, all of which we’ll look at today.
Understanding the High Value Council Tax Surcharge Against UK Properties
The real-world cost of the surcharge will depend on the value of each property, with the proposed charging structure announced at the budget as follows:
| Property Valuation | Annual Surcharge |
| £2 to £2.5 million | £2,500 |
| £2.5 to £3.5 million | £3,500 |
| £3.5 to £5 million | £5,000 |
| Over £5 million | £7,500 |
Government figures indicate that around 100,000 households will be affected, with the vast majority in London and the south east, with 50% of all English residences valued at £2 million or more based in the capital, and 85% in the south east.
This has prompted criticisms, especially around the exemptions applied to council houses and other forms of social housing, given that in these regions even small homes and flats may be subject to the tax.
Concerns Around the Valuation of UK Homes for the New Mansion Tax
One of the most significant problems identified by our property accountants at James Todd & Co and the real estate sector clients we work with is that the implementation of a new tax within a relatively short period means that valuations will widely be dependent on generic desktop valuations, rather than more detailed in-person surveys and inspections.
There may be comprehensive valuations for some properties, but most will be assigned a nominal valuation. This will be based on sales data within the immediate area, recent planning applications and aerial maps, which is considered very likely to lead to mis-valuations and contested outcomes.
In addition, the use of averages could mean a much smaller property, or a home in different condition than redevelopments in the local area will be overvalued by a substantial margin. This has given rise to wide-spread doubts about whether the government will be able to put the infrastructure in place to handle the expected volume of appeals.
Another issue for developers, investors and buy-to-let landlords is that the mansion tax is just the latest in a series of reforms and removals of tax reliefs.
A number of changes have made it more expensive to contribute to the private rental market, something that is of great concern due to the number of areas that are already experiencing pronounced housing shortages.
Reviewing the Tax Reforms Putting Pressure on Property Sector Businesses
There have been many increases to operational costs, freezes to tax brackets and reductions in tax reliefs that have impacted companies and businesses across the industries.
However, many perceive that the scale of reform has disproportionately affected the property sector, with changes including:
- The 2% increase to property rental income tax due to come into effect from April 2027
- Capital Gains Tax liabilities applied to most sales of second properties or buy-to-let residences
- Additional-rate Stamp Duty Land Tax that increased from 3% to 5% in 2024 for second-home buyers
- A switch from being able to deduct interest expenses before declaring a taxable rental profit, with landlords now having a basic-rate 20% tax credit against financing costs
However, the positives are that the rumoured transition from stamp duty to a national property tax, and speculation around a localised property tax have not happened and that, after significant reform, it seems less likely any major new announcements will be made.
Advice for Property Professionals Managing Higher Taxation From the Expert Property Accountants
The best action plan for any business concerned about the introduction of a new tax, including the High Value Council Tax Surcharge, or the impacts of reforms on their profitability is to speak with one of our specialist property accountants who have years of expertise in the sector.
While the right strategies will always depend on your business structure and current trading position, there are several possible ways forward, including the potential to register an independent or private company as a limited firm.
Other investors might wish to be proactive about organising independent valuations that could act as evidence to contest an inflated valuation assessment, or to determine which properties will attract the surcharge to enable them to make informed decisions about whether or not these should remain part of their portfolios.
Property businesses and investors may also choose to engage in the public consultation which is expected to look at any reliefs or exemptions that could apply.
Regardless of the steps you choose to take, we’d recommend you remain up to date with the further information expected from the government in due course, which will disclose how the surcharge will be applied to properties owned through corporations, partnerships and trusts.
Consulting the James Todd & Co Real Estate Specialists for Strategic Property Tax Planning Advice
We recognise that the Autumn Budget was a source of stress for many property owners and businesses, not least coming amid a period of sustained higher costs of trading and living, and our chartered accountants remain on hand to add clarity and certainty to your decision making through proactive tax planning and professional guidance.
Our real estate specialists work with property investors, consultants, landlords and developers, alongside niche businesses whose work relates to the property sector.
You are welcome to get in touch to schedule a time to talk via phone, email or by completing our quick contact form, and we’ll put you in touch with an experienced property accountant at either our James Todd & Co Chichester or Fareham offices, whichever is most convenient for you.