Thousands more homeowners could potentially face the government’s planned High Value Council Tax Surcharge if the proposed starting threshold is reduced from £2 million to £1.5 million.
The surcharge is currently due to begin in April 2028 and, under the government’s published plans, would apply to residential properties in England valued at £2 million or more. However, reports that ministers may consider lowering the threshold to £1.5 million have raised fresh concerns across higher-value property markets.
London and parts of the South East could be particularly affected, where property values are significantly higher than many other parts of the country.
£1.5m Threshold Could Widen The Tax Net
The proposed High Value Council Tax Surcharge is currently structured across four bands, with annual charges ranging from £2,500 to £7,500 depending on the property’s value. The current government policy sets the starting point at £2 million.
However, a reported move to introduce the surcharge from £1.5 million would bring a much larger number of properties into consideration.
Knight Frank says the possibility of a lower threshold has already attracted attention in outer London and parts of South East England. The property consultancy also notes that the proposal could affect decisions made by both buyers and sellers.
For now, it is important to stress that the £1.5 million threshold remains speculation. The government’s published plans continue to set the threshold at £2 million.
Potential Impact On Buying And Selling
A lower threshold could influence how buyers and sellers negotiate property prices.
Homeowners whose properties are close to a surcharge band could have an incentive to remain below the relevant threshold, while buyers may take the future annual charge into account when deciding how much they are willing to pay.
Knight Frank has warned that this could create more price negotiations around the different tax bands, similar to the distortions previously associated with stamp duty thresholds.
The policy could also influence homeowners considering moving up the property ladder. Some may reconsider purchasing a more expensive home if doing so results in an additional annual tax charge.
At the other end of the market, some owners could consider downsizing to reduce their exposure to the surcharge.
Valuation Could Become A Bigger Challenge
Another potential issue is how properties would be valued if the threshold were reduced.
Knight Frank estimates that 73,600 properties are currently worth between £1.8 million and £2.2 million, creating what it describes as a valuation grey area around the existing £2 million threshold.
If the starting point were reduced to £1.5 million, Knight Frank estimates that this grey area could increase to 222,800 properties, significantly increasing the number of homes requiring careful valuation.
Under the existing plans, the Valuation Office, which is part of HM Revenue & Customs, will carry out a targeted valuation exercise to identify properties that fall within the surcharge. Properties will then be placed into one of four value bands.
What Is The Government’s Current Plan?
The government announced the High Value Council Tax Surcharge at the 2025 Budget. Under the published policy, it will apply from April 2028 to residential properties in England worth £2 million or more. The government expects fewer than 1% of properties to fall within its scope.
The current charging structure is:
| Property value | Annual surcharge |
| £2m to £2.5m | £2,500 |
| £2.5m to £3.5m | £3,500 |
| £3.5m to £5m | £5,000 |
| Over £5m | £7,500 |
The government has also proposed support and deferral arrangements for some homeowners who may struggle to meet the charge.
What Happens Next?
The reported £1.5 million threshold has not been confirmed by the government. Its published policy remains based on a £2 million starting point from April 2028.
However, the latest speculation highlights how changes to the threshold could have a significant effect on higher-value homeowners, particularly in London and the South East.
For homeowners with properties close to either threshold, the final rules will be important. Any change could affect annual housing costs, property negotiations and decisions about whether to move, sell or remain in a current home.
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