Budget 2025: Mansion Tax – The UK’s First True ‘Dry Tax’ on Individuals?

Properties will require updated valuations, and the policy paper suggests these will be based on 2026 values, bringing the system far closer to modern market pricing.

Key questions remain:

• How will the 2026 valuation exercise be conducted in practice?
• Will taxpayers be able to appeal or challenge valuations?
• Will valuations be refreshed periodically, or frozen?

And given the trend among mortgage lenders increasingly relying on Zoopla, Rightmove and automated valuation models, there is a further question: will the Government follow suit and accept online-derived valuation evidence?

The surcharge appears clearly targeted at owners, not occupiers – a significant structural departure from standard Council Tax principles.

We now know it will be embedded within the existing Council Tax bill, which raises operational questions:

• How will councils distinguish between the standard element (charged to occupiers) and the surcharge (charged to owners)?
• How will billing work where the owner does not live at the property?
• Will tenants become in some way liable for the charge if the owner fails to pay?
• The land registry can of course be used to confirm ownership, but how will residual address be tracked, particularly where overseas owners are involved?
• Will penalties and interest mirror existing Council Tax rules?

The surcharge will be collected by local authorities but retained by central government, so could this restrict or influence local government’s future ability to increase standard Council Tax rates? Local authorities may find their fiscal independence narrowing, even while bearing the administrative burden of collection.

ATED (Annual Tax on Enveloped Dwellings) is an annual charge on UK residential property valued above £500,000 that is held through a company or certain types of collective investment vehicles. It applies regardless of whether the property is used or rented.

Much like the VCTS will be, it is a completely separate tax from Council Tax.

Because the two charges are conceptually and legislatively different, it is reasonable to assume:

• No credit or set off will apply between the surcharge and ATED
• Where a property is enveloped, double charges may arise, unless a specific ATED exemption applies (for example, property rental businesses)

This could create unexpected cost duplication for corporate structures.

The UK has not re-banded Council Tax since 1991, this being the focus of a comparison point made by Chancellor Rachel Reeves in respect of fairness.

By contrast, when ATED was introduced in 2013, it initially applied only to properties over £2 million. By 2016, the thresholds had been significantly expanded to catch properties valued at £500,000 and above.

The relevance here is the precedent and the Government’s resolve to widen nets: where a recurring property-based tax is introduced, thresholds can expand over time, gradually bringing more properties into scope.

Just because properties with a £2 million value are the focus currently does not mean that will stay for long.

The consultation may give an indication as to whether the surcharge is a standalone charge on high-value property ownership, or the first step towards a broader update of property-based taxation.