Rachel Reeves is said to be considering the implementation of a new council tax surcharge on properties valued above £2 million as part of her upcoming Budget. This proposed “mansion tax” is expected to affect over 100,000 of the most expensive homes. Originally, there were reports that the Chancellor was considering a threshold of £1.5 million, impacting 300,000 households. However, the threshold has been raised to £2 million to prevent putting 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 most expensive band F, G, and H homes, affecting approximately 2.4 million properties to determine eligibility for the surcharge.
According to The Times, individuals will have the option to defer payment of the tax until they sell their home or pass away. The Treasury has not provided any official comments on the Budget speculation.
Council tax bands in England are based on property values from April 1991. The average council tax for Band D properties in England for the 2025-2026 financial year is £2,280, with different band structures in Scotland and Wales.
The government is currently seeking feedback on proposals to extend council tax payment periods from ten to twelve months. While households can request a 12-month payment plan for smaller monthly installments, this may become the default under the new plans. Data from the Ministry of Housing, Communities, and Local Government suggests that the average Band D household could save around £38 per month with a 12-month payment schedule.
Households will still have the option to pay their council tax over ten months if preferred. The consultation also includes suggestions to slow down debt collection processes for missed payments.
Residents are advised to check if they qualify for council tax discounts, such as a 25% reduction for single occupancy or a 50% discount when all occupants are exempt from paying. Those on benefits or low incomes should inquire about Council Tax Support or Reduction schemes, which could lead to substantial bill reductions or complete exemptions.
Furthermore, homeowners are encouraged to review their council tax bands and challenge them if necessary. While a lower band could result in higher future bills, correcting an overvalued band may lead to refunds and reduced bills going forward.