Chancellor Rachel Reeves is facing growing pressure to launch a full-scale overhaul of England’s council tax system, as the Treasury considers plans to introduce a new levy on the country’s most expensive homes.
Council tax is still based on outdated 1991 property valuations, and the Treasury is reportedly exploring an update to the top three bands (F to H). Under the emerging proposal, properties valued above an undecided threshold — expected to sit between £1 million and £2 million — could face an additional flat annual charge of £2,000–£3,000. Revenue from the so-called “mansion tax” would go directly to the Treasury.
Experts Call for Full Revaluation, Not Half Measures
Helen Miller of the Institute for Fiscal Studies warned that targeting only higher-band homes risked making an already outdated system even more complicated.
“Once you start revaluing the top end, why not update the whole system?” she said. “We’ve relied on 1991 valuations for more than three decades — how long can this continue?”
The New Economics Foundation echoed the sentiment, urging the government to redesign property taxation entirely rather than taking a piecemeal approach.
Political Sensitivity Remains High
Successive governments have avoided revaluation due to fears of backlash from households that could face higher bills. Some Labour MPs have also raised concerns about the impact on “asset-rich, cash-poor” residents living in high-value homes.
Reeves has maintained that those with the “broadest shoulders” should contribute more, but the final threshold for the new charge has not been decided.
Support for a Fairer System
Adam Corlett from the Resolution Foundation welcomed the direction of travel, noting that wealthier property owners often pay the lowest share of income in council tax. He also suggested that the new levy could be placed on homeowners rather than tenants, creating a fairer structure.
Estimates suggest the proposed charge could generate under £1 billion per year, depending on where the threshold is set. In contrast, a recent proposal from the Institute for Public Policy Research could raise £3 billion for the Treasury, plus an extra £1 billion to reduce council tax for those in cheaper homes.
Measures Expected in Reeves’s Budget
The chancellor is expected to pair the property tax reforms with a package of cost-of-living support, including help with energy bills. She has already confirmed a one-year extension of the £9.90 NHS prescription charge freeze, saying no one should be forced to choose between health and household costs.
Reeves has also insisted her budget will focus on cutting waiting lists, easing living costs, and reducing the national debt.
The new property levy is not expected to take effect immediately and may include a deferral option, allowing older homeowners to pay the charge from their estate to avoid selling their homes.
With the budget approaching, the Treasury has stressed it does not comment on speculation.