New High Value Council Tax Surcharge: consultation reveals how the regime could work

The Government has now launched its consultation on the design and delivery of the HVCTS, running from 19 May 2026 to 14 July 2026. The consultation is inviting views from local government, homeowners, tax experts, legal professionals and the wider property industry and the information contained in the consultation paper gives us some much-anticipated insight into how the Government is envisaging the HVCTS will be applied.

The consultation is important because many of the practical details remain to be settled. It seeks views on matters including how “owner” should be defined, what discounts and exemptions should apply, how those unable to pay may be supported through a deferral mechanism, how valuation, billing, appeals and enforcement should work, and the potential equalities impacts of the proposals.

How much will you pay?

The surcharge applies to properties valued at £2 million or more with four bands as follows.

The HVCTS will rise annually in line with the Consumer Prices Index (CPI) and properties will be revalued every five years by the Valuation Office. The first revaluation will take place in 2033. It is proposed that properties that are significantly improved or altered after implementation of the HVCTS will be revalued and banded at the next valuation or, on the sale of the Property, whichever is sooner.

The administrative burden

When the HVCTS was announced, the sheer administrative burden of introducing and implementing a new tax including revaluing and re-banding properties seemed immense. The consultation paper makes it clear that where appropriate, existing council tax processes will be replicated in the HVCTS system. For example:

• The definition of “Dwelling” that is proposed to be used is taken from the Local Government Finance Act 1992 as already used for council tax. Dwellings will include their gardens, garages and private storage buildings mainly used for domestic purposes.
• The process for challenging valuations and banding will follow the same process and timescales as already used for council tax.
• The criteria for assessing eligibility for a deferral of payment of the HVCTS on the basis of disability or severe mental impairment could be based on the same criteria as for equivalent council tax discounts and exemptions.
• Payment schedules are likely to follow the same billing cycle as for council tax with the option of 10 or 12 month instalment payments.

In addition, the consultation paper explains that local authorities will be compensated for the additional administration costs that they will face in implementing and enforcing the HVCTS in their area.

The Valuation Office also faces a significant challenge in revaluing and banding properties ahead of the introduction of the HVCTS. The consultation paper sets out the valuation approach that will be adopted for properties falling within the scheme (those valued at £2 million or more in 2026).

The Government is proposing to use the Valuation Office’s existing independent and accredited automated valuation model (AVM), already used for domestic valuation work together with professional valuers reviewing and assuring those properties identified by the AVM as being within the scope and the initial valuation provided by the AVM.

Who will pay?

As stated above, the consultation paper sets out to define owners. The Government proposes that an owner will be the legal owner(s) of a residential property. Owners can be individuals, corporate entitles, long leaseholders, those with a lease for life or until marriage and trustees including those holding on bare trusts.

Exemptions are proposed for certain classes of residential property including halls of residence, ministry of defence accommodation such as barracks, diplomatic accommodation, care homes, long stay hospitals and hospice facilities and domestic violence refuges.  

The consultation seeks comments as to whether the owners of “tied” properties could be exempt for example where a farmer has to live on his farm for the purposes of his business.

Developers of luxury new build properties will be exempt in relation to unsold properties but only for a period of 12 months after a completion notice is issued. With this in mind they will need to be confident that properties will be sold either off plan or in quick order once completed. With increasing numbers of developers holding unsold units and “off-plan” deals at a 12 year low across England & Wales, a risk of paying HVCTS will add to developers’ already significant costs of holding and financing unsold units.

Affordability and deferral options

The Government states that it recognises that there may be affordability issues for many home owners including those on lower incomes such as retirees or those affected by illness or job loss. When the HVCTS was announced the Government made it clear that deferral options would be included with the option to pay the tax on the sale of the property. But the detail now proposed does not make such deferral open to all. There will be no discounts or reductions and no deferral for second homes or corporate owners.

Eligibility for deferment will be assessed on the income or capital threshold of the owner, or on a defined disability or mental impairment criteria (which might make it difficult for an owner to move from their property).

The proposed income threshold is that deferral may be available for those with an income of up to £35,000; or with capital savings of £16,000 or less. Applications for deferral will need to include evidence of income and investments.

Deferral will be available at the point when HVCTS is introduced or a property is purchased, or at a later date if circumstances change. Equally, an owner can opt out of deferment at a later date before the sale of a property and pay the tax due at that point.

Deferral has a number of issues that will need to be considered. Local authorities will have the power to take a charge over any property where the HVCTS is deferred but there must be sufficient equity in the property to secure the deferred amount. The deferred amount will increase with each passing year and interest will accrue on top of the deferred amounts. There is no indication at this time as to what the appropriate interest rate will be set at and the consultation invites comments on what an appropriate level of interest might be.

Information gathering

It is anticipated that the first bills for HVCTS will be issued in March 2028. Ahead of that process a draft list of properties falling within the scope of HVCTS will be issued in late 2027 allowing time for owners to correct inaccuracies without the need to issue a subsequent formal challenge.

At the outset and as a continuing process once the HVCTS is up and running, local authorities will need to gather information as to who the correct owner of each affected property is. For this purpose information notices will be issued to the person that they consider to be the liable owner but can also be sent to occupiers, management companies and lettings agents etc. Whilst there are no proposed penalties for non-owners who do not respond to an information request, owners who fail to respond or provide mis-information are likely to face financial penalties of 10% of the total annual HVCTS liability after 21 days of an information request notice being issued increasing to 30% after a further 21 days (at the local authorities’ discretion and subject to a right of appeal to the valuation tribunal).

Penalties will also apply where a liable owner fails to correct an incorrect assumption regarding exemptions or premiums within 21 days of realising that the information is incorrect.

The information gathered as part of the HVCTS process may also be used to inform whether non-UK resident owners should be required to pay an additional HVCTS premium on properties falling within the scheme. Views are sought as to whether such owners should pay an additional premium as they already do in relation to stamp duty land tax.

Enforcement

Local authorities already have strong enforcement powers and it is proposed that the enforcement powers granted in the HVCTS system will replicate the same enforcement framework as already exists for council tax. The national council tax collection rate is currently 96%.

Planning ahead

The HVCTS will not come into force until 6 April 2028, but the consultation now under way means that the shape of the regime is still being settled. Owners, prospective purchasers and advisers should follow the consultation closely and consider responding before the 14 July 2026 deadline, particularly where ownership structures, valuation evidence, hardship deferral or exemptions may be relevant.

While the HVCTS is modest compared to property taxes in some European countries, it signals a shift in the UK’s approach to high-value homes.

Depending on the purchaser and the property, other taxes to those mentioned in this article can be relevant.

Overseas investors should review their existing holdings, factor the tax position into purchasing budgets and seek professional advice on valuations, ownership structures and any consultation response that may be appropriate.

For further information please contact Emma Sear or your usual Wedlake Bell adviser.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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