Prime London homeowners to face property tax hike of up to 437% with new mansion tax: Jefferies London

The new mansion tax will appy to UK properties valued at GBP2 million and above (Picture: João Barbosa/Unsplash)

Owners of prime London residences are set to face a rise in their annual property tax bill following the introduction of a new “mansion tax” aimed at UK properties valued at GBP2 million ($3.4 million) and above. The High Value Council Tax Surcharge, announced last month as part of the UK’s Autumn Budget 2025, will take effect in 2028.

Currently, UK homeowners pay an annual council tax, with the amount based on the property’s council tax band. In England, properties are assigned a council tax band, ranging from Bands A to H, according to the estimated market value of the property as of April 1, 1991.

With the rollout of the new mansion tax, homeowners will pay an annual surcharge on top of the existing council tax. The amount of the surcharge will be subject to the 2026 valuation of the property as assessed by the government’s Valuation Office Agency.

Properties valued between GBP2 million and GBP2.5 million will incur a surcharge of GBP2,500 a year, while those valued from GBP2.5 million to GBP3.5 million will be charged GBP3,500 annually. Properties valued between GBP3.5 million to GBP5 million will be charged GBP5,000 per year, while those over GBP5 million will be charged GBP7,500.

According to Damien Jefferies, founder of London property broker Jefferies London, the new mansion tax surcharge represents a major shift in the cost of owning a high-value home in London. He says: “When added to existing council tax, the increases are substantial, especially at the top end of the market where annual bills will now rise by several hundred per cent.”

Research by Jefferies London shows owners of homes valued over GBP5 million stand to see the steepest spikes in their annual property tax bill. Analysing properties within the three highest council tax bands (F to H) across London’s core prime boroughs, the brokerage found that owners of such homes in Westminster will see the biggest surge, with their average council tax bill jumping 437% from GBP1,718 to GBP9,218 per year.

The City of London showed the second-biggest surge, with the average council tax bill for properties over GBP5 million estimated to jump 349%, rising from GBP2,151 to GBP9,651 per year. Elsewhere, the yearly tax bill is expected to spike 306% for similar homes in Hammersmith and Fulham, followed by Kensington and Chelsea (+283%) and Camden (+211%).

Within the lower surcharge thresholds, Jefferies London estimates that across the core prime boroughs, the annual council tax bill could increase by 70% to 146% for properties valued at GBP2 million to GBP2.5 million, by 98% to 204% for properties valued between GBP2.5 million to GBP3.5 million, and by 141% to 291% for properties valued between GBP3.5 million to GBP5 million.

For Jefferies London founder Damien, the new mansion tax could potentially have a detrimental impact on the London property market. “Prime buyers already shoulder the largest Stamp Duty Land Tax liabilities and the highest transaction costs. Adding such a significant recurring charge risks undermining confidence in a market that plays an important role in supporting the wider London economy,” he adds.