The UK’s new ‘mansion tax’: taxing in the dark? 

On New Bond Street in Westminster sits a £74 million townhouse. According to Land Registry data, it was purchased almost seven years by a company registered in the British Virgin Islands. That company has never registered with Companies House. There is no publicly available information about who owns it. 

From April 2028, properties like this one will be subject to the new High-Value Council Tax Surcharge (HVCTS) – the so-called ‘mansion tax’ – announced by Chancellor Rachel Reeves in her first Autumn Budget.  HVCTS will see residential properties valued at £2 million and above attract an annual charge ranging from £2,500 to £7,500. The surcharge is expected to affect around 100,000 homes and raise £400 million per year.   

Politically, the policy is easy to sell to voters. But beneath the headlines lies a harder question:  How do you collect taxes on high-value property if the owner is hidden behind complex and opaque legal structures?  In the case of the property on New Bond Street - who will Westminster Council send their bill to? 

Council tax surcharge: A misnomer   

Despite its name, the surcharge differs fundamentally from council tax.  

Although collected by local authorities, the revenue will be passed to central government. It remains unclear how it will be redistributed, but areas with the highest concentration of high-value properties are unlikely to be the main beneficiaries. This risks creating little incentive for councils to take time to collect fee they may never see and instead prioritise collecting traditional council tax over the HVCTS, as it directly funds services such as housing, adult social care and special educational needs.  

There is another more fundamental problem. The HVCTS will be levied on the legal owner of the property, not the occupier. While councils are well equipped to identify who lives in a property — occupiers must register and pay council tax and can also be found on the electoral roll — they often have far less visibility over who owns it. Landlord registers can sometimes help, but only a minority of councils operate them, coverage is patchy at best, and governments plan for a national register have still not been rolled out.  

Finding the owner: an enforcement headache   

The Government has indicated it will consult in 2026 on how the surcharge should operate, including the treatment of ‘more complex ownership structures including companies, funds, trusts and partnerships’. These questions will be central to how the tax works in practice.  

If councils are required to identify the legal owners of properties in their area, they will need to rely on consulting the Land Registry data for England and Wales.  Where a property is owned directly by an individual, or by a UK-registered company, identifying the legal owner is relatively straightforward. But the picture becomes far more complex when expensive homes are held through overseas companies, trusts, and other complex chains of ownership.   

Overseas entities that own UK property are now required to register with Companies House and disclose their beneficial owners. However, coverage and compliance remain weak. Research by Tax Policy Associates suggests that almost one in four (23%) offshore companies owning property in England and Wales have not declared who ultimately owns them:  

• 8% have not registered at all;  
• 5% list another shell company as their owner; and  
• 10% claim to have no natural person as a beneficial owner.  

Tax Policy Associates estimates that around £190 billion worth of property lacks proper beneficial ownership details. Many of these properties are likely to exceed the £2 million threshold.  

Return to the New Bond Street townhouse. How would Westminster Council track down a person to pay the surcharge if it can’t confirm whether this BVI company is still the owner, or whether the company has relocated, changed name, or even been sold on?  

A 2025 Freedom of Information request by the Financial Times revealed that Companies House has collected only 3% of fines issued to non-compliant overseas entities. If central government struggles to enforce penalties against opaque offshore structures, it is difficult to see how a local authority would fare better.  

Properties owned by trusts may also present a significant enforcement challenge. Legal arrangements like these are notoriously slippy and hard to pin down, with information about them difficult to access, making it hard for local authorities to trace down a natural person who could pay the tax.  

A game of cats and mouse   

Finding the ultimate owner may not always be necessary. In most cases, the legal owner (even if a company) will simply pay the tax. If it does not, penalties can accrue, and the debt can ultimately be secured against the property or other assets held by the entity.   

In theory, councils could pursue unpaid tax and arrears through enforcement action, potentially issuing charging orders against the property. The surcharge would then need to be settled, with interest, when the property is sold.  

But this still requires councils to identify and pursue a legally liable entity. If that is an opaque offshore company, or a trust, enforcement becomes slower, resource-intensive and uncertain. Tracing ownership chains, serving notices abroad and navigating corporate structures are not routine council functions. Many councils operate with small compliance teams and limited specialist expertise. This resource-intensive work is more typically associated with HMRC than local authorities.  

The Government has said it will fund local authorities to help them administer and collect the tax, but it remains to be seen whether they will have sufficient resources, expertise and incentive to go after those trying to dodge this tax.    

Valuation problems  

The tax will also depend on an initial valuation exercise carried out by the Valuation Office to identify properties above the £2 million threshold. Fewer than 1% of homes in England are expected to fall into scope, with revaluations every five years and inflation adjustments in between.   

But here too, transparency gaps pose a problem. In many cases, data on the price paid for properties is incomplete or missing, making it harder to identify which homes should be taxed in the first place. Other countries, such as France, require much more comprehensive disclosure of property transaction values -- a gap the UK has yet to address.  

There is also the question of how the surcharge will interact with the Annual Tax on Enveloped Dwellings (ATED), which applies to residential properties owned through companies. ATED operates on different thresholds and valuation dates, and is administered by HMRC rather than local authorities, raising the risk of inconsistency and confusion about total liabilities.  

Will the mansion tax be workable?  

Steering clear of debates over whether the mansion tax is ambitious enough, or whether it addresses the regressive nature of council tax, serious questions remain regarding its administration and enforcement. Opacity over property ownership will make it significantly harder for councils to collect this tax. Weak transparency will increase enforcement costs, make recovery efforts harder and create opportunities for avoidance.   

If the Government wants this new tax to work as intended, it needs to strengthen the transparency rules around property ownership. The forthcoming Asset Ownership Review, announced as part of the Anti-Corruption Strategy and expected in the summer of 2026, presents an opportunity to do just that.  

To close remaining transparency loopholes over the ownership of land, the Government should:   

• Close loopholes that allow secret ownership of UK property through offshore companies or trusts 
• Strengthen and enforce the Register of Overseas Entities, ensuring non-compliance carries real consequences  
• Ensure that the land register captures property transaction values systematically, date of purchase, and retains historical data 
• Ensure councils have clear legal access to ownership information where they remain responsible for collection, as well as other existing data held by other agencies, including those paying ATED (HMRC), overseas landlords enrolled in Self-Assessment or the Non-Resident Landlords Scheme (HMRC), and overseas landlords registered on the Private Rented Sector Database (MHCLG)