Thousands of London homeowners are set to face significant new charges as the government's so-called 'mansion tax' comes into effect, with exclusive analysis revealing the scale of the impact across the capital.
What is the High Value Council Tax Surcharge?
Chancellor Rachel Reeves announced the High Value Council Tax Surcharge in her recent budget, targeting properties valued at more than £2 million. The new levy, which homeowners have dubbed the 'mansion tax', will take effect from 2028 and will be charged on top of existing council tax bills.
The Treasury states the reform aims to create greater fairness in the council tax system. Currently, the average Band D property in England pays £2,280 annually - £250 more per year than a £10 million Mayfair property based on Westminster's Band H charge.
London Bears the Brunt of New Tax
Analysis of Land Registry data by the Reach Data Unit has identified every home in England and Wales that sold for over £2 million during the past five years. The findings reveal 26,500 properties exceeded the mansion tax threshold since 2020, with 67% of these located in London.
Westminster emerges as the epicentre of the new charge, with 3,832 homes sold for £2 million or more - representing 14% of the national total, or one in every seven affected properties.
Kensington and Chelsea follows closely with 3,525 high-value transactions (13% of the total), while Camden recorded 1,482 (6%), Wandsworth 1,412 (5%), Hammersmith and Fulham 1,212 (5%), and Richmond upon Thames 1,068 (4%).
How the New Surcharge Will Work
The Valuation Office will conduct targeted valuations to identify properties above the £2 million threshold. The surcharge operates across four bands:
- Properties valued between £2 million and £2.5 million: £2,500 per year
- £2.5 million to £3.5 million: £3,500 per year
- £3.5 million to £5.0 million: £5,000 per year
- Over £5 million: £7,500 per year
From 2029-30 onwards, these charges will increase annually in line with CPI inflation, ensuring the real value of the tax is maintained over time.
While London dominates the list of affected properties, some areas outside the capital will also feel the impact. Elmbridge in Surrey leads non-London locations with 939 properties, while Bournemouth, Christchurch and Poole recorded 241 transactions above the threshold, and Cheshire East saw 183.
The government's move represents the most significant change to property taxation in years, disproportionately affecting London where property values have soared far beyond other regions.
