Chancellor Rachel Reeves has taken what commentators are calling a brave political step by announcing England's first property revaluation in over three decades, introducing a new 'mansion tax' surcharge on high-value homes.
The New Council Tax Surcharge Structure
Under the new plan scheduled for implementation in April 2028, the government will create four additional price bands for the most valuable properties in England. The system will impose a surcharge of £2,500 per year for homes valued between £2 million and £2.5 million, with the levy escalating up to £7,500 annually for properties in the highest band worth £5 million and above.
This additional charge will apply on top of existing council tax bills and will be paid directly to the Treasury, rather than local authorities. The measure is expected to affect approximately 100,000 properties across England, targeting the wealthiest homeowners who have benefited from unprecedented property value growth since the current council tax bands were established in 1991.
A Revolutionary Step in Disguise
While the Institute for Fiscal Studies has described the reform as 'baby steps' in council tax overhaul, the revolutionary element lies in the property revaluation itself. This marks the first comprehensive reassessment of English property values since legislation introduced the A-to-H banding system in 1991, following the poll tax riots and Margaret Thatcher's departure.
The current council tax system has long been criticised as inherently regressive, taxing lower-value homes more harshly proportionally than properties that have soared in value over the past three decades. Many band H properties, originally valued at £320,000 in 1991, are now worth five to six times that amount yet pay relatively modest council tax.
Despite its groundbreaking nature, the financial impact remains modest. The surcharge is projected to raise just £400 million, paling in comparison to academic proposals such as Oxford professor John Muellbauer's scheme that could generate approximately £6 billion through more comprehensive reforms.
Political Courage and Historical Context
Rachel Reeves' move represents significant political courage, given the fierce resistance that has defeated previous mansion tax proposals. Gordon Brown avoided the measure, as did numerous Conservative chancellors fearful of backlash from wealthy property owners.
The Liberal Democrats proposed a similar tax before the 2010 general election but abandoned it amid concerns about older residents being forced to sell family homes. Ed Miliband's 2013 proposal for a £30,000 annual charge on £2 million properties was denounced in Parliament and widely considered electoral suicide.
Remarkably, the current mansion tax plan was not mentioned in Labour's 2024 election manifesto, making its inclusion in the budget particularly significant. Estate agents report that premium properties have already seen values decline following recent non-dom tax changes, suggesting the new surcharge could further impact the luxury market.
Unlike previous crude proposals, Reeves has established a sophisticated framework that begins with revaluation—creating the infrastructure for potentially more substantial wealth taxation in future. As one commentator noted, this represents the best opportunity in decades for establishing a fairer tax on property wealth, achieved through careful political strategy rather than overt declaration.
