The High Value Council Tax Surcharge, commonly referred to as the Mansion Tax, may increase beyond its initial rates following its introduction in April 2028, according to Knight Frank.
The surcharge applies to properties valued at £2 million or more in England and will add between £2,500 and £7,400 annually to existing council tax bills, depending on property value. The measure was announced in last autumn’s Budget.
Funding spending commitments
Tom Bill, head of UK residential research at Knight Frank, said Prime Minister Andy Burnham faces difficult fiscal decisions to fund government spending plans.
“There has been a flurry of announcements since Burnham entered 10 Downing Street on 20th July, including a £2 bus fare cap in England, a cut in business rates for pubs and clubs, abolishing VAT on electricity bills and overhauling the social care system,” Bill said.
He added that a range of taxes on assets and wealth appears to be the preferred funding method, suggesting the High Value Council Tax bands “may prove to be merely introductory rates”.
Bill noted that bond market constraints, Labour backbencher opposition to spending cuts, and manifesto commitments ruling out income tax, VAT or national insurance rises limit the government’s options.
“If high-value property is targeted in the third successive Budget (following changes to the additional rate of stamp duty in 2024 and council tax bands in 2025), it could put a dent the gradual recovery that has been taking place in the prime London market this year,” he said.
Capital gains tax alignment
Bill also indicated that aligning Capital Gains Tax rates with Income Tax rates represents another possible Budget measure.
Such a change would affect landlords selling properties, though Bill warned that tenants could also face consequences if owners exit the market and upward pressure on rents increases.
The Renters Rights Act, introduced in May, has already prompted some landlords to exit the market whilst others have raised asking rents to offset increased financial risks associated with the new legislation, according to Bill.
These potential changes come as recent market data shows volatility in property transactions, whilst estate agencies face rising compliance costs.
Bill suggested that a stamp duty reduction would stimulate the housing market, though Burnham has previously stated he will not change stamp duty rates.
Market implications
The combination of potential tax increases on high-value properties and changes to capital gains tax could affect investor sentiment in the London prime property market, which has shown signs of recovery in 2026.
The measures would represent the third consecutive Budget targeting property taxation, following changes to additional rate stamp duty in 2024 and council tax band reforms in 2025.
