Property has been one of the main targets of recent Budgets, and the Autumn Budget on 28 October 2026 is expected to be no different. The High Value Council Tax Surcharge, widely known as the mansion tax, is already on its way for homes in England worth £2 million or more, and there has been speculation that it could be widened or increased. At the same time, landlords face higher Income Tax on rental profits from April 2027. This article explains what is confirmed, what is being discussed, and what it all means for landlords and second home owners.
Disclaimer: This article is for general information only and reflects legislation, government consultation documents and public commentary available in October 2026. Details of the High Value Council Tax Surcharge are still subject to consultation and may change, and any further changes discussed as possibilities have not been announced. Always seek specific advice tailored to your own property holdings.
What the Mansion Tax Actually Is
The High Value Council Tax Surcharge was announced at the November 2025 Budget and is due to start in April 2028. It is an annual charge on residential properties in England valued at £2 million or more, payable on top of normal council tax. It does not replace council tax, and it does not apply in Scotland or Wales.
Properties caught by the surcharge will be placed into one of four bands, based on their value. Homes valued between £2 million and £2.5 million will pay £2,500 a year. Homes valued between £2.5 million and £3.5 million will pay £3,500 a year. Homes valued between £3.5 million and £5 million will pay £5,000 a year. Homes valued at £5 million or more will pay £7,500 a year. Both the charges and the value thresholds are due to rise each year in line with CPI inflation.
The government launched a consultation on the detail of the surcharge on 19 May 2026. It proposes that, wherever possible, the surcharge will follow existing council tax processes, including the definition of a dwelling, the process for challenging a valuation, and payment by 10 or 12 monthly instalments. Properties will be valued using 2026 values, and reports suggest the revaluation exercise will focus on homes currently in council tax bands F, G and H.
Who Pays: Owner, Not Occupier
The most important point for landlords is that, unlike ordinary council tax, which is usually paid by the person living in the property, the surcharge is levied on the owner. A landlord letting a property worth more than £2 million will therefore pay the surcharge personally, even though the tenant continues to pay the normal council tax bill.
This makes the surcharge a direct cost of ownership for landlords, in the same way as insurance or maintenance. Whether it will be deductible against rental profits for Income Tax purposes has not been confirmed in the material published so far, so landlords should not assume it will be.
Worked Example 1: A Second Home in London
James and Laura live in Hertfordshire and own a flat in central London that they use during the week for work, valued at £2.3 million in 2026 values. From April 2028, they will pay a High Value Council Tax Surcharge of £2,500 a year on the flat, on top of the normal council tax bill for the property, with the charge rising each year in line with inflation. Because the surcharge is based on the value of each individual property, their main home in Hertfordshire, valued at £1.4 million, is not affected.
Worked Example 2: A Landlord Facing Two Changes at Once
Amira owns a large house in North London, valued at £2.8 million, which she lets to tenants. Her rental profit is £40,000 a year, and because she has other income, all of it is taxed at the higher rate.
From April 2027, the higher rate of Income Tax on property income rises from 40% to 42%, increasing her tax on the same profit by £800 a year. From April 2028, the property falls into the £2.5 million to £3.5 million band of the surcharge, adding a further £3,500 a year. Before taking inflation into account, Amira's annual costs from these two measures alone will be around £4,300 a year higher than today, without the Budget on 28 October adding anything further. This is the kind of combined effect landlords with high value properties need to model now, rather than looking at each change in isolation.
What Could Change in the Budget
There has been speculation that the Chancellor could lower the £2 million threshold or increase the charges before the surcharge takes effect. Nothing has been confirmed, and the consultation published in May was based on the original design.
The wider political backdrop is relevant. The Prime Minister has long argued that the UK taxes work more heavily than wealth, and has previously spoken in favour of a Land Value Tax. However, he has indicated that this Budget will not abolish stamp duty or council tax, which makes a wholesale replacement of property taxation unlikely for now. Incremental changes, such as adjustments to the surcharge, remain possible.
Capital Gains Tax is the other area property owners are watching. Gains on residential property are currently taxed at 18% or 24%, depending on your Income Tax band, and there has been speculation about aligning Capital Gains Tax more closely with Income Tax. Again, no proposal has been announced, and HMRC's own modelling suggests that a large rate increase could reduce revenue.
Worked Example 3: What a Lower Threshold Could Mean
Purely as an illustration of why the threshold matters, consider Margaret and Peter, a retired couple who own their family home in Hertfordshire, valued at £1.7 million. Under the surcharge as currently designed, they are not affected. If the threshold were lowered to £1.5 million, their home would be brought into scope, adding a new annual charge to their outgoings even though their income has not changed. Many owners in this position are asset rich but cash poor, which is one reason any change to the threshold would be politically sensitive. We stress that no lower threshold has been announced, and this example is included only to show how a change could affect people who currently fall outside the surcharge.
Other Property Tax Changes Already Coming
The surcharge is only one part of the picture for property owners. From April 2027, Income Tax rates on property income rise by two percentage points, to 22%, 42% and 47%, for landlords holding property in their own names. From April 2027, landlords and sole traders with qualifying income over £30,000 must also join Making Tax Digital for Income Tax, as explained in our guide to the £30,000 threshold. And from April 2027, most unused pension funds will fall within estates for inheritance tax purposes, which matters for landlords whose estate planning combines property and pensions.
For landlords who hold property through a limited company, the position is different, since company profits are subject to Corporation Tax rather than the property income rates. However, companies face their own rules, including the Annual Tax on Enveloped Dwellings for some higher value residential properties, and it is worth checking how the final surcharge rules treat company owned homes once they are published.
What Landlords and Second Home Owners Should Do Now
Check whether any of your properties could be valued at £2 million or more in 2026 values, and build the relevant surcharge band into your projections from April 2028.
Model the combined effect of the April 2027 property income rate rise, the surcharge and any mortgage interest changes, rather than looking at each in isolation, particularly if interest rates rise as the Bank of England has signalled they might.
Review whether your current ownership structure still suits your plans, but do not restructure, sell or transfer property purely because of Budget speculation. Moving property between individuals, spouses or companies can trigger Capital Gains Tax and Stamp Duty Land Tax, and these costs can easily outweigh any saving.
Keep good evidence of your property's condition and characteristics. If you believe a future valuation for the surcharge is too high, the consultation proposes that you will be able to challenge it through the existing council tax appeals process.
Frequently Asked Questions
When does the mansion tax start?
The High Value Council Tax Surcharge is due to start in April 2028, based on property values in 2026.
How much is the mansion tax?
Under the current design, £2,500 a year for homes valued between £2 million and £2.5 million, £3,500 for £2.5 million to £3.5 million, £5,000 for £3.5 million to £5 million, and £7,500 for homes valued at £5 million or more, with charges and thresholds rising each year with CPI inflation.
Does the mansion tax apply to rented properties, and who pays?
Yes, it applies to residential properties in England valued at £2 million or more, whether owner occupied, let or used as a second home. It is charged to the owner, not the tenant, so landlords will pay it personally.
Does the mansion tax apply in Scotland or Wales?
No, the surcharge announced so far applies to properties in England only.
Will the threshold be lowered in the Autumn Budget?
There has been speculation that it could be, but nothing has been announced. The design consulted on in May 2026 used the £2 million threshold.
How will my property be valued for the surcharge?
The government has said properties will be valued using 2026 values, and reports suggest the exercise will focus on homes currently in council tax bands F, G and H. The consultation proposes that valuations can be challenged through the same process and timescales as ordinary council tax.
Can landlords deduct the surcharge from their rental income?
This has not been confirmed in the material published so far. Landlords should not assume relief will be available until the final rules are published, and should factor the full cost into their projections in the meantime.
Should I sell or transfer a property before the Budget?
Not purely because of speculation. Selling or transferring property can trigger Capital Gains Tax and Stamp Duty Land Tax, and acting on a rumour that does not materialise can be costly. If a sale or restructure was already planned, speak to your accountant about timing.
What CoreAcc Accountants Can Help You With
CoreAcc Accountants works with landlords and property owners across Hertfordshire and North London to model the combined effect of the property tax changes already legislated, including the April 2027 property income rate rise, Making Tax Digital and the High Value Council Tax Surcharge from April 2028. We review ownership structures, advise on the tax cost of any proposed sale or transfer before it happens, and will update clients as soon as the Budget confirms whether the surcharge or property taxation more generally is changing.
Get in Touch
If you own a property that could be worth £2 million or more, or you are a landlord wondering how the changes coming in 2027 and 2028 will affect your returns, contact CoreAcc Accountants. We will work through your figures under the current rules now, so you are ready to respond quickly once the Budget detail is known.
CoreAcc Accountants is an ACCA accredited firm of Chartered Certified Accountants based in Borehamwood, Hertfordshire. This article was published in October 2026 and reflects legislation, consultation documents and public commentary available at the time of writing. Matters described as possibilities have not been confirmed. It does not constitute professional or legal advice. Always seek specific advice tailored to your individual circumstances.
