The mansion tax was introduced to generate revenue for the UK government. According to the Government, it aims to reduce the number of super-rich individuals in the country and its potential adverse impact on public services. If adopted, the deferral proposals would mean high-value homeowners could pay the taxman through the sale of the home after they die.
Owners of expensive homes could defer paying Labour's mansion tax until after they die, if they are deemed to be on a low income. The mansion tax was announced in Rachel Reeves' Budget in November 2025.
It will see owners of homes worth £2million or more subject to a High Value Council Tax Surcharge from 2028. This will range from £2,500 per year to £7,500 per year, depending on the value of their home. The Government has now published a consultation to seek views on how the controversial proposals could work. It says it will make a deferral scheme available, meaning some eligible homeowners won't have to pay until they sell the home.
When the policy was announced, pensioners living in high-value homes were one group concerned they would not be able to afford the tax, as they were no longer earning. Levy: High-value homes will be hit with a council tax surcharge from 2008 under Labour plans RELATED ARTICLES Share this article Share If adopted, the deferral proposals would mean they could pay the taxman through the sale of the home after they die.
To be able to defer, they will need to prove that either their income or savings are below a certain level. The Government proposes that deferral be available to households with an annual household income of £35,000 or less, or savings of £16,000 or less. It said this was in line with the income cut-off used to decide whether someone receives other benefits, such as Winter Fuel Payments.
A couple on the full, new state pension alone would currently get just over £25,000 per year, bringing them below the threshold. However, interest will be charged on the payments that are deferred. The consultation suggests several potential rates for this, including the Bank of England base rate and the rate used in deferred payment agreements for adult social care currently 4.75 per cent.
The Government will conduct a 'targeted valuation exercise' to identify properties in scope of the tax. The first will take place before it comes in in 2028, and the next in 2033. Read More NatWest to offer mega mortgages of 6.5 times salary: Who can get one? The Government says fewer than 1 per cent of properties will be eligible for the charge, though this is likely to increase over time as house prices go up.
The owners of homes worth between £2million and £2.5million will pay £2,500 a year. This will increase to £3,500 a year for homes worth £2.5million to £3.5million, £5,000 a year for those worth £3.5million to £5million, and £7,500 for homes worth over £5 million. Charges will rise in line with Consumer Prices Index inflation. Homeowners wishing to defer will have to provide evidence such as payslips or statements of earnings, or bank and pension statements, to their local authority.
Sarah Coles, of investment platform AJ Bell, says that while the surcharge 'won't break the bank for those on high incomes living in expensive properties,' the criteria for those who do not fit into that bracket and want to defer are 'remarkably tight.
' Coles added: 'Household income might have to be no more than £35,000 or total household savings up to a limit of £16,000 in order to qualify. 'Many people over both these thresholds could struggle to pay thousands of pounds each year in extra tax. ' She added that the interest charged would add a further burden, especially if someone deferred for many years.
'A relatively punchy interest rate can make a big difference when interest is rolled up,' Coles said. How to find a new mortgage Mortgage rates have soared after conflict with Iran has driven up inflation expectations and dashed hopes of interest rate cuts. If you need a mortgage because you are buying a home, or your current fixed rate deal is due to end, you should explore your options as soon as possible.
This is Money has a long-standing partnership with fee-free broker L&C, to provide you with expert mortgage advice. Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs. Or use L&C’s online Mortgage Finder to search thousands of deals from more than 90 different lenders to discover the best deal for you. This is Money's mortgage tips What if I need to remortgage?
Borrowers should compare rates, speak to a mortgage broker and be prepared to act. Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it. Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying arrangement fees.
If you do this and don't clear the fee on completion, interest will be paid on it over the term of the loan. What if I am buying a home? Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people's borrowing ability and buying power.
What about buy-to-let landlords? Buy-to-let landlords with interest-only mortgages will see a greater jump in monthly costs than homeowners on residential mortgages. This makes remortgaging in plenty of time essential and our partner L&C can help with buy-to-let mortgages too. >Find your next mortgage deal with This is Money and L&C Mortgage service provided by London & Country Mortgages , which is authorised and regulated by the Financial Conduct Authority .
The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage
Labour's Mansion Tax High Value Council Tax Surcharge Eligible Homeowners Deferring Payments Until A Determining Eligibility Interest Charges On Deferred Payments
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