£1.5m mansion tax ruled out, but the £2m grey zone remains

When reports emerged last month that the Treasury was weighing a reduction in the entry threshold for the upcoming High Value Council Tax Surcharge, dropping it from £2 million down to £1.5 million, private client practices across the UK immediately braced for client enquiries.

Lowering the bar by £500,000 would have dramatically expanded the net. According to figures reported by The Times, lowering the threshold would have raised the total number of affected English homes from roughly 134,000 at the £2 million mark to an estimated 271,000 at £1.5 million, with around half located in London alone.

Subsequent reports indicate that ministers have ruled out the lower entry point, opting to keep the surcharge focused on the £2 million line. The Treasury has not formally confirmed its position ahead of the 28 October Budget. The surcharge itself remains on course to take effect in April 2028 following the closure of government consultations in July.

For accountants advising asset-rich clients, the brief media flurry serves as a sharp reminder of how sensitive property tax planning has become.

What the Market Data Shows

Data from estate agency research highlights why the £1.5 million proposal caused such immediate concern in regional and London markets.

Estate agency group Yopa estimates that lowering the threshold to £1.5 million would have increased the number of affected listed properties to 11,316, equivalent to 9.4% of all available stock on the London market. Backbench MPs raised vocal concerns that expanding the tax down to £1.5 million would draw thousands of standard suburban family homes into a tax framework originally intended for high-value prime properties.

Knight Frank research underlines the scale of the valuation challenge. Its analysis indicates that 222,800 homes sit in the valuation grey area surrounding a possible £1.5 million entry point. By contrast, Knight Frank estimates that 73,600 properties currently sit in the £1.8 million to £2.2 million band around the confirmed £2 million threshold.

That 73,600 figure represents the immediate exposure zone for private client advisers preparing for the 2028 rollout.

Mapping the Proposed Costs and Valuation Mechanics

To advise clients accurately on potential liabilities, practices need a clear view of the four proposed surcharge bands set out in government consultation documents:

• £2 million to £2.5 million: £2,500 annual surcharge

• £2.5 million to £3.5 million: £3,500 annual surcharge

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• £3.5 million to £5 million: £5,000 annual surcharge

• £5 million and above: £7,500 annual surcharge

Because these charges sit on top of standard local council tax, the financial impact for borderline properties is immediate upon crossing a threshold.

The valuation process itself will be carried out by the Valuation Office Agency (VOA) using automated valuation models (AVMs), comparable sales evidence, and professional valuer oversight. AVMs rely heavily on regional indexation and historic sales data, which can miss internal property specifications, unrecorded structural modifications, or hyper-local market dips.

For properties sitting near the £2 million or £2.5 million band boundaries, automated desktop modeling creates a distinct risk of inaccurate banding. Establishing independent, contemporary RICS valuations today gives advisers robust baseline evidence to challenge incorrect VOA bandings when formal assessments are issued.

Preparing Clients for 2028

Forward-thinking practices are using the current clarity to build structured review workflows well ahead of 2028.

Scenario: A mid-sized practice managing a large book of South East property owners audited its database to isolate primary residences falling into the £1.8 million to £2.2 million grey zone. For those clients, the firm recommended securing formal, independent RICS valuations using comparable sales data. Establishing clear valuation evidence today prepares clients before the VOA begins its targeted valuation exercises ahead of 2028. When media reports indicated that the £1.5 million proposal was off the table, the firm’s clients already had a clear, defensible position mapped out for the £2 million threshold.

What firms should do now

With the consultation closed and the Budget two weeks off, here’s where to focus.

1. Audit Borderline Assets and Track VOA Guidance

Focus on clients whose primary residence sits in the £1.8 million to £2.2 million range identified by Knight Frank. The VOA’s heavy reliance on automated modelling makes independent market evidence vital for establishing a clear baseline if clients need to challenge a VOA banding determination later.

2. Incorporate the Surcharge into Client Cash-Flow Models

Ensure annual personal tax and wealth reviews reflect the exact band costs, ranging from £2,500 up to £7,500 per year. Adding these fixed outgoings into pension drawdown calculations and liquidity forecasts prevents unexpected cash-flow strain when billing begins in 2028.

3. Explore Deferral Options for Cash-Poor Owners

For asset-rich, cash-poor clients, an annual surcharge represents a distinct cash-flow hurdle. Advisers should note that government consultation documents explicitly propose a deferral option for owners with limited income, allowing qualifying taxpayers who lack immediate liquidity to defer payment.

4. Clarify Tax Boundaries and Avoid Misleading Restructuring

Clients often ask whether splitting title deeds or transferring partial equity can move a home beneath the £2 million line. Advisers must make clear that the surcharge attaches to the market value of the residential dwelling itself, not individual equity shares. Fractional transfers do not reduce the property’s overall valuation, and restructuring simply to avoid the surcharge risks triggering unnecessary Capital Gains Tax or Stamp Duty Land Tax liabilities.

It took a matter of weeks for the £1.5m threshold to come and go. The firms best placed for 2028 will be the ones that don’t wait for the next leak to get their clients ready.