Rachel Reeves is said to be preparing to implement a new council tax surcharge on homes valued at over £2 million as part of her upcoming Budget. This move, often referred to as a “mansion tax,” is expected to affect more than 100,000 of the most expensive properties.

Initially, there were reports that the Chancellor was considering a threshold of £1.5 million, which would have impacted around 300,000 households. However, it has been suggested that the threshold has been raised to £2 million to avoid disadvantaging families considered “asset-rich, cash poor.”

In England, council tax is categorized into bands according to property values from April 1991. It is rumored that the Chancellor is planning to reassess around 2.4 million of the highest-value Band F, G, and H properties to determine those subject to the surcharge.

According to The Times, individuals will have the option to defer payment of the tax until they either move house or pass away. The Treasury has refrained from commenting on any Budget-related speculations.

Council tax bands in England are based on property valuations from 1991. The average Band D council tax for the 2025-2026 fiscal year in England stands at £2,280. It is important to note that Scotland and Wales have their own distinct council tax bands.

Currently, the government is consulting on proposals to extend council tax payment periods from ten to twelve months. Under the new plans, payments over 12 months would be the default option, allowing for smaller monthly payments. Household costs could potentially decrease by approximately £38 per month if payments were stretched over 12 months, as per data from the Ministry of Housing, Communities, and Local Government.

Households will still have the choice to stick with the traditional ten-month payment schedule. The consultation also suggests a more lenient debt collection process in cases where council tax payments are missed.

Residents are encouraged to inquire with their local council about possible council tax discounts. For instance, individuals living alone are entitled to a 25% discount on their council tax bill, while households where all occupants are exempt from council tax receive a 50% discount.

Those receiving benefits or with low incomes should check with their local council regarding Council Tax Support or Council Tax Reduction schemes, which may result in significant reductions or complete exemptions from council tax bills.

Lastly, homeowners should consider challenging their council tax band if they suspect it is too high. A successful challenge could lead to substantial refunds and lower future bills. However, it is crucial to conduct thorough research, as disputing a council tax band that is too low may result in increased future payments.