The government is considering plans to hit non-UK resident property owners with an extra “mansion tax” charge in a bid to raise more cash.
A consultation launched by HM Treasury explores the possibility of applying a “non-resident premium” on top of the High Value Council Tax Surcharge (HVCTS), also known as the “mansion tax”.
The consultation says: “In high‑pressure housing markets, particularly in areas such as London, there is interest in understanding whether demand from non‑UK resident owners may be contributing to pressures on housing availability and prices.”
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The extra non-resident surcharge is just being considered and will not necessarily come into effect. The government’s consultation closes on 14 July.
An HM Treasury spokesperson said: “The government is inviting views on whether there could be a case for a non-resident premium, as part of a wider consultation which seeks to address a longstanding council tax unfairness in this country.
“We welcome views from all interested parties, including on whether demand from non-resident owners may be contributing to housing pressures.”
What is the mansion tax and how would a non-resident premium be applied?
The HVCTS will take effect from April 2028 and apply to homes in England worth £2 million or more. The charge will be owed once per tax year.
The chancellor has claimed the surcharge will make the council tax system fairer.
The Valuation Office (VO), which is part of HMRC, is set to carry out a valuing exercise to assess which homes the surcharge will apply to.
Homes valued at £2 million or more but less than £2.5 million will be charged £2,500.
Properties worth £2.5 million or more, but less than £3.5 million will need to pay £3,500. Homes worth between £3.5 million and £5 million will need to pay £5,000. Properties worth £5 million or more face a £7,500 surcharge.
These charges are set to be increased each year in line with the Consumer Price Index (CPI) measure of inflation. Revaluations will be conducted by the VO every five years.
When it comes to the non-resident premium, there is no further detail in the government’s consultation on how the extra levy would be applied if it did come into force.
What could the effect of the premium be?
Marc Acheson, global wealth specialist at pensions and life insurance firm Utmost, said: “This latest proposal is likely to raise far less revenue than envisaged as more people will consider selling London properties, putting further downward pressure on valuations at the top end of the housing market.
“More broadly, it risks further damaging the UK’s reputation as a destination for wealth and accelerating the ongoing exodus of wealthy international individuals that began in earnest following the abolition of the non-dom regime at the Autumn 2024 Budget.
“The economy cannot afford to lose these individuals, who are the largest contributors to the tax base, and once this cohort leaves it is very hard to replace them.”
Sian Armitage, tax director at tax advisor Mark Davies and Associates, said the premium could push non-resident property owners weighing up a sale into putting their property on the market.
“For those that are undecided, they may treat this as yet another reason to sell, or consider this as an indication of things to come,” Armitage said.
However, Armitage added that because the levy would be applied to non-residents “it does imply that those individuals are not spending significant time in the UK in any case, so I don’t envisage this policy alone as having a negative impact”.
Meanwhile, Peter Ferrigno, director of tax services at consultancy Henley and Partners, said making the HVCTS slightly higher for non-UK residents would be an “inconvenience”, but it was unlikely the introduction of such a premium on its own would be enough to make wealthy individuals sell up.
But, he said the bigger issue is they could leave when also considering “many other changes, and an indication that there will still be more demands for a bit here, a bit there, a bit more after that, and then…who knows what’s next”.
What is a non-UK resident?
Non-UK residents pay tax on their UK income, but not on their foreign income. In contrast, a UK resident would typically pay UK tax on income from both sources.
You are generally classed as a non-UK resident if you spend fewer than 16 days in the UK each tax year or work abroad full-time and spend fewer than 91 days in the UK each tax year and no more than 30 of those days are spent working.
The statutory residence test (SRT) determines whether you are resident in the UK under UK domestic tax law for tax years 2013/14 onwards. You can find out more on gov.uk.
