The implementation of England’s mansion tax faces significant valuation complications ahead of its April 2028 launch, according to property law experts.
The Valuation Office Agency (VOA) has been tasked with valuing properties throughout England to determine which exceed the £2 million threshold, but questions remain about how leasehold properties and country estates will be assessed.
Leasehold valuation concerns
Robert Barham, a partner at law firm Forsters, has identified particular challenges with leasehold properties, which include most flats and some London houses.
In areas such as Mayfair, complex leasehold structures mean multiple parties may own interests in the same property. Where a flat held under a short lease has its value split between landlord and tenant, neither party may own an interest exceeding £2 million.
“Given that it is a tax on the value of the property, then no-one who owns an interest in a property which is valued below the relevant threshold ought to have to pay the tax,” Barham stated.
However, a parliamentary response to MP David Simmons revealed that the VOA will value all flats assuming a 99-year lease at nominal rent, regardless of actual lease terms.
This approach means some owners whose actual legal interest has a market value below £2 million may still face the tax, despite government statements that the charge applies to “owners of residential property in England worth £2 million or more in 2026”.
Administrative questions
The mechanism for issuing surcharge demands remains unclear. Questions persist about whether councils will target Council Tax payers, registered owners, or maintain separate registers of legal owners.
The potential administrative burden on local authorities and whether central government will provide compensation for maintaining additional registers has not been addressed.
Rural property complications
Country properties present additional valuation challenges. Properties that exceed £2 million when including land, outbuildings and facilities may fall below the threshold when considering only the main residence.
Barham suggested the VOA could adopt HMRC’s approach to Capital Gains Tax Private Residence Relief, which typically allows exemptions on grounds and buildings up to half a hectare, with extensions where additional land is required for “reasonable enjoyment” of the property.
“It would be unfair to adopt a restrictive definition of a property when calculating an allowance, but a wider definition when calculating a tax,” he noted.
Consultation planned
Ministers have announced a spring consultation on issues related to the High Value Council Tax Surcharge, as the measure is officially known. The consultation’s scope and whether it will address these valuation concerns has not been confirmed.
The £2 million threshold was set in 2026 values, with the tax scheduled to take effect in April 2028, giving the VOA approximately two years to complete the valuation exercise across England.
