Rachel Reeves is said to be considering the implementation of a new council tax surcharge on properties valued over £2 million as part of her budget plans. This potential move, referred to as a “mansion tax,” could impact over 100,000 of the most expensive homes.
Initially, there were reports that the Chancellor was aiming for a threshold of £1.5 million, affecting around 300,000 households. However, it is now suggested that this threshold has been raised to £2 million to prevent placing undue financial strain on families considered “asset-rich, cash poor.”
In England, council tax is categorized into bands based on property valuations from April 1991. The plan involves revaluing the most expensive Band F, G, and H homes, affecting approximately 2.4 million properties to determine the applicability of the surcharge.
According to The Times, individuals may have the option to defer payment of the tax until they either relocate or pass away. The Treasury has refrained from commenting on any specific details regarding the budget proposals.
Council tax in England is distributed across different bands, with Band D representing the average council tax amount for the 2025-2026 financial year at £2,280. Scotland and Wales have their own unique council tax banding systems.
The government is currently in the process of consulting on potential changes to extend council tax payment periods from ten to twelve months. This adjustment could result in smaller monthly payments for households. However, under the proposed changes, the default payment schedule would be spread over 12 months.
Households will retain the option to stick with the ten-month payment plan if they prefer. Additionally, the consultation includes suggestions to slow down the debt recovery process in cases where council tax payments are missed.
Residents are advised to inquire with their local council about eligibility for council tax discounts. For instance, individuals living alone may receive a 25% discount on their council tax bill, while households with all members disregarded from paying may be entitled to a 50% reduction.
Those claiming benefits or with low incomes should explore if their local authority offers Council Tax Support or Council Tax Reduction schemes, which could lead to significant reductions or complete exemptions from council tax bills.
Lastly, homeowners are encouraged to investigate the possibility of challenging their council tax banding. Correcting an overvalued band could result in refunds and lower future bills, although it is essential to conduct thorough research as challenging a band that is too low may lead to higher future payments.