Leaders of four London councils have written jointly to the Chancellor to object to incoming changes to a proposed increase in council tax.
The high values council tax surcharge, known as the “mansion tax” would see those who own homes worth over £2million pay an additional levy on top of existing council tax charges.
The money raised would go directly to central government, with the measures forecast to raise £430million each year.
The leaders of Kensington and Chelsea, Wandsworth, Richmond upon Thames, and Westminster Councils told Chancellor John Healey that “A home is the centre of family life, not an untapped tax stream”. Before saying that “It is simply wrong to assume everyone living in these homes is wealthy.”
What Is the Mansion Tax?
The high value council tax surcharge was first announced by former Chancellor Rachel Reeves in her November 2025 budget, and is scheduled to come into force in April 2028. The Treasury say that it was designed with the aim of tackling “a long-standing unfairness in our country”.
The scheme would divide homes worth over £2million into four bands, with the owners of the highest value homes paying the highest annual surcharges.
HMRC have said they will conduct a “targeted valuation” of homes before the tax is implemented. Analysis from estate agents Benham and Reeves estimates that roughly 84,000 homes in Greater London alone would be subject to the mansion tax, with annual payments ranging between £2,500 and £7,500.
Unlike the existing council tax system, which was introduced in 1991, none of the money raised would go directly to councils themselves. The Treasury has however said that “local authorities will be fully compensated for the additional costs of administering this new tax.”
Why Are Councils Objecting?
The four councils believe that deciding basing a greater portion of an individual’s tax burden on their house price will disproportionately target older people.
“This is not a tax targeted at the very wealthy” said Elizabeth Campbell, the Conservative Leader of Kensington and Chelsea Council. “It lacks nuance, and will hit pensioners, families, and long-standing residents whose homes have risen in value while their incomes have not.”
The letter claimed that the four boroughs would provide roughly £270million in revenue between them each year, over 60% of the Treasury’s estimated national total.
“This is an unfair attack of well-run councils” said the leader of Wandsworth Council Robert Morris (Conservative), who said that “Wandsworth residents (will be) hammered to pay for those elsewhere”.
Gareth Roberts, the Liberal Democrat leader of Richmond Council believes that the government are “seeing Richmond residents as cash cows that they can milk to fix funding gaps elsewhere in the country. Irrespective of whether they can afford to pay this new tax”.
Westminster City Council’s leader Paul Swaddle also raised concerns about whether this tax would be affordable for residents.
He said that high value homes “do not always always translate into high household incomes”, and that the tax “risks creating unfair outcomes for residents whose property value does not reflect their ability to pay.”
The leaders’ joint letter said that “It is simply wrong to assume that everyone living in these homes is wealthy. Many are not, and under this proposal, some will be forced to sell the family home simply to meet this tax.”
Why Is the Mansion Tax Being Introduced?
When announcing the mansion tax, Rachel Reeves declared that the estimated £430million of revenue would be used to support funding for local services.
She may also have hoped that by targeting the owners of the country’s most valuable homes, the tax could have a progressive impact on Britain’s wealth distribution.
By specifically building the system around house prices, the tax will disproportionately target London and the South East. This is due to these areas experiencing a faster rise in house prices compared to the rest of the country, since the current council tax bands were introduced in 1991.
A group of 13 Labour MPs wrote to Reeves the month before the budget to propose the abolition of the existing council tax system.
They described it as “outdated, deeply regressive, and increasingly indefensible.”
While the mansion tax won’t meet their demands for an entirely new council tax system, it will ensure fewer houses are taxed based on their valuation from 35 years ago.
It will also offer the new Chancellor John Healey a means of raising revenue without breaking any of Labour’s 2024 manifesto pledges not to raise income tax, VAT, or national insurance.
It is unknown how the mansion tax could affect the housing market, with new Prime Minister Andy Burnham saying that ending rough sleeping was one of his key priorities, shortly after entering government.
You can still get a copy of our new edition of ChamberUK. Our parliamentary journal.