Mansion Tax: £2m+ Properties Face Annual Surcharge from 2028
The Autumn Budget 2025 introduced a high-value council tax surcharge for properties over £2 million, starting April 2028. See the bands, costs, and ATED comparison.
In this article
Key Takeaways
- Mansion tax (High-Value Council Tax Surcharge) announced in Autumn Budget 2025, starting April 2028 for properties over £2 million
- Annual charges: £2,500 (£2m-£2.5m), £3,500 (£2.5m-£3.5m), £7,500 (over £3.5m), collected alongside council tax bills
- Up to 200,000 properties affected (60% in London and South East), with no exemption for primary residences
- ATED (Annual Tax on Enveloped Dwellings) already charges companies £4,400-£292,350 annually on properties over £500,000
- Companies buying residential property over £500,000 pay flat 17% SDLT (increased from 15%), plus annual ATED charges
- Rental business relief and development relief can eliminate ATED charge, but 17% SDLT still applies
- Expected market impact: pricing pressure on properties just above £2m threshold, similar to SDLT threshold effects
- Mansion tax is separate from stamp duty changes. High-value homes face both upfront SDLT and annual recurring tax from 2028
What Is the High-Value Council Tax Surcharge?
Announced in the Autumn Budget on 26 November 2025, the High-Value Council Tax Surcharge, commonly referred to as a "mansion tax", will add an annual levy on residential properties valued at £2 million or more. Starting from April 2028, this represents the first time individual homeowners face a recurring annual property tax beyond standard council tax. Use our stamp duty calculator to estimate upfront purchase tax on high-value properties.
The surcharge is collected by HMRC and goes directly to the Treasury, not local councils. This distinguishes it from council tax, which funds local services. The new levy is designed to generate revenue from high-value residential properties, bringing individual homeowners closer in line with the tax burden already placed on companies holding property through the Annual Tax on Enveloped Dwellings (ATED) regime. For broader context on proposed stamp duty reforms, see our stamp duty reform proposals article.
Surcharge Bands and Annual Costs
The surcharge is structured in three bands based on property value:
| Property Value | Annual Surcharge |
|---|---|
| £2m – £2.5m | £2,500 |
| £2.5m – £3.5m | £3,500 |
| Over £3.5m | £7,500 |
Note: Valuations will be based on a new Valuation Office Agency assessment, separate from council tax banding. Relief may be available for properties that were above £2m at purchase but have since fallen in value.
Who Will Be Affected?
The surcharge will affect approximately 200,000 properties across the UK, representing less than 1% of all homes. Around 60% of these properties are concentrated in London and the South East, reflecting the higher property values in these regions.
The surcharge applies to all ownership types, including:
- Individuals and couples owning properties in their own names
- Properties held in trust
- Companies (in addition to existing ATED charges)
Crucially, there is no exemption for primary residences. Whether the property is your main home, a second home, or a buy-to-let investment, if it exceeds £2 million in value, the surcharge applies.
ATED: Annual Tax on Enveloped Dwellings Explained
ATED (Annual Tax on Enveloped Dwellings) is an annual charge that has existed since April 2013. It applies to companies, and certain partnerships and collective investment schemes, that own UK residential property valued over £500,000.
The tax was introduced to discourage the ownership of high-value UK residential property through corporate structures (known as "enveloping"). Prior to ATED, wealthy individuals could avoid stamp duty and inheritance tax by purchasing properties through offshore companies.
What Is "Enveloping"?
Enveloping means holding a residential property within a corporate structure (typically a company) rather than in personal ownership. This was historically used for tax planning purposes, allowing wealthy individuals to avoid stamp duty on transfers by selling shares in the company rather than the property itself.
ATED only applies to properties worth more than £500,000. It is administered by HMRC, and annual returns must be filed even if relief is claimed. The charge increases annually in line with inflation.
Current ATED Bands and Charges
ATED charges are banded by property value and increase annually. The rates for the 2025-26 tax year are:
| Property Value | Annual ATED Charge (2025-26) |
|---|---|
| £500,000 - £1,000,000 | £4,400 |
| £1,000,001 - £2,000,000 | £9,000 |
| £2,000,001 - £5,000,000 | £31,050 |
| £5,000,001 - £10,000,000 | £72,700 |
| £10,000,001 - £20,000,000 | £145,950 |
| Over £20,000,000 | £292,350 |
Annual indexation: ATED charges are updated each April in line with the Consumer Price Index. The rates above apply to the 2025-26 tax year and will increase slightly for 2026-27.
Property valuations for ATED purposes are based on market value at specific revaluation dates (1 April 2012, 1 April 2017, and 1 April 2022). The next revaluation date is 1 April 2027.
ATED Reliefs and Exemptions
While ATED applies broadly to companies holding residential property, several important reliefs are available:
Rental Business Relief
Properties let commercially on an arm's length basis to unconnected third parties qualify for rental business relief. This is the most commonly claimed relief and eliminates the ATED charge for genuine buy-to-let investments held in corporate structures. The property must be let for at least 210 days in the relevant chargeable period.
Development Relief
Properties held by developers for development or resale (not rental) may qualify for development relief. The property must be acquired with the intention of developing and reselling in the course of a property development trade. This relief supports genuine commercial property development businesses.
Other Reliefs
- Charitable relief: Properties held by qualifying charities
- Public body relief: Properties owned by public bodies
- Farmhouse relief: Farmhouses occupied by farm workers
- Employee occupation relief: Properties made available to employees
- Open to the public relief: Historic properties open to the public for at least 28 days per year
Important: Relief must be claimed annually. Even if relief is available, an ATED return must still be filed to claim it. Failure to file can result in penalties even if no ATED is due.
Comparison with ATED for Companies
Companies holding residential properties already pay the Annual Tax on Enveloped Dwellings (ATED). The new surcharge is significantly lower than ATED because it targets individual homeowners rather than corporate structures. Here's how they compare:
| Property Value | New Surcharge (Individuals) | ATED (Companies, 2025-26) |
|---|---|---|
| £2m – £2.5m | £2,500 | £30,550 |
| £2.5m – £3.5m | £3,500 | £30,550 |
| £3.5m – £5m | £7,500 | £70,550 |
| £5m – £10m | £7,500 | £117,800 |
| £10m – £20m | £7,500 | £236,250 |
| Over £20m | £7,500 | £274,050 |
Important: Companies will pay both ATED and the new surcharge. The surcharge is significantly lower than ATED because it targets individual homeowners rather than corporate structures.
Connection to 17% SDLT Rate for Companies
Companies buying residential property over £500,000 face a flat 17% stamp duty rate (increased from 15% in recent years). This corporate SDLT rate works in conjunction with ATED to discourage corporate ownership of residential property. See our corporate buyer guide for more details on company purchases.
Example: Company Buying £2 Million Property
Upfront SDLT: £2,000,000 × 17% = £340,000
Annual ATED charge (2025-26): £31,050
Year 1 total cost: £371,050
Plus £31,050 every subsequent year (indexed annually)
The combined effect of the 17% SDLT rate and annual ATED charges makes corporate ownership of residential property extremely expensive unless relief applies. This dual-tax approach was designed to prevent tax avoidance through corporate structures.
| Purchase Price | 17% Corporate SDLT | Annual ATED | 5-Year Total Cost |
|---|---|---|---|
| £750,000 | £127,500 | £4,400 | £149,500 |
| £1,500,000 | £255,000 | £9,000 | £300,000 |
| £3,000,000 | £510,000 | £31,050 | £665,250 |
For properties held as genuine buy-to-let investments or development projects, rental business relief or development relief can eliminate the annual ATED charge, but the 17% upfront SDLT still applies. This makes corporate ownership viable only for specific commercial purposes, not personal use. Check our current rates page for the latest SDLT thresholds and bands.
Impact on the Property Market
Property analysts expect modest price pressure on properties near the £2m threshold, similar to the "cliff edge" effect seen at SDLT thresholds. Buyers may be deterred from purchasing properties just above £2 million if they can secure a comparable property below this level and avoid the annual surcharge.
Estate agents report that some vendors are already pricing properties just below £2m to avoid triggering the surcharge for potential buyers. This pricing strategy mirrors behavior seen around other tax thresholds and could lead to a concentration of listings at £1.95m to £1.99m.
The long-term impact on the prime London property market is debated. Some analysts believe the surcharge will further dampen demand in an already challenging market, while others argue that buyers in this segment are less price-sensitive and will absorb the cost as part of overall ownership expenses.
Frequently Asked Questions About Mansion Tax and Annual Surcharge
What is the mansion tax?
The "mansion tax" commonly refers to the High-Value Council Tax Surcharge announced in Autumn Budget 2025, which will charge £2,500-£7,500 annually on properties worth £2 million or more from April 2028. It can also refer to ATED (Annual Tax on Enveloped Dwellings), an existing annual charge on companies owning residential property over £500,000, ranging from £4,400 to £292,350 per year.
Do I have to pay ATED?
ATED applies only to companies, certain partnerships, and collective investment schemes that own UK residential property valued over £500,000. Individual homeowners do not pay ATED. They will pay the new High-Value Council Tax Surcharge from 2028 if their property exceeds £2 million. If your property is held in a company and qualifies for rental business relief or development relief, you may not owe ATED.
How much is the annual surcharge?
The new High-Value Council Tax Surcharge for individual homeowners will be £2,500 annually for properties worth £2m-£2.5m, £3,500 for £2.5m-£3.5m, and £7,500 for properties over £3.5m (from April 2028). ATED for companies ranges from £4,400 (£500k-£1m properties) to £292,350 (over £20m properties) for the 2025-26 tax year.
Can I claim ATED relief for rental properties?
Yes, rental business relief is available for properties let commercially to unconnected third parties on an arm's length basis for at least 210 days per year. This is the most common ATED relief and eliminates the annual charge for genuine buy-to-let investments held in corporate structures. However, you must file an annual ATED return to claim the relief, even though no tax is due.
What is the 17% stamp duty rate for companies?
Companies buying residential property worth over £500,000 pay a flat 17% SDLT rate (increased from 15% in recent changes). This applies to the entire purchase price, not in bands. Combined with annual ATED charges, this makes corporate ownership of residential property extremely expensive unless the property qualifies for ATED relief (e.g., rental business or development). This dual-tax approach discourages tax avoidance through corporate structures.
Calculate Your Stamp Duty
While our calculator focuses on stamp duty at the point of purchase, buyers of properties over £2 million should now factor in this annual surcharge from 2028 onwards. The surcharge adds a significant ongoing cost to property ownership that must be considered alongside the upfront stamp duty bill.
Calculate Your Stamp Duty
Emma Richardson, MRICS
Chartered Surveyor & Property Tax Specialist
Emma Richardson is a RICS-qualified Chartered Surveyor with over 12 years of experience in UK property taxation. She founded Stamp Duty Calculator to help buyers understand the complex world of property transaction taxes.