New council tax rule may let state pensioners defer payments until after death

The government is proposing a significant change to council tax rules that could allow low-income homeowners, including state pensioners, to delay payments on high-value properties until they sell their home or pass away. This proposal is part of a newly launched consultation on the design of the High Value Council Tax Surcharge (HVCTS).

Introduced in the 2025 Budget, the HVCTS targets owners of residential properties in England valued at £2 million or more. It aims to increase council tax contributions from the wealthiest 1% of property owners, addressing longstanding inequalities in the current system and generating additional revenue to support local government services.

Under the new scheme, homeowners of qualifying properties would face an extra annual charge ranging from £2,500 to £7,500, depending on property value. Recognizing concerns raised by state pensioners who may struggle with these higher costs, ministers are considering a deferral scheme. This would allow eligible low-income homeowners to postpone their HVCTS payments until they sell their home or die.

Labour Party minister Steve Reed emphasized the fairness of the surcharge, highlighting the disparity in council tax bills between average and high-value properties. He pointed out that while a band D property worth around £400,000 pays approximately £2,400 to £2,600 annually, a £10 million Mayfair mansion in band H pays around £2,100 under current rules. The HVCTS seeks to rectify such inequities by ensuring owners of the most valuable homes pay their fair share.

Less than 1% of residential properties in England will be subject to the HVCTS, which will be collected in addition to existing council tax bills. The revenue generated will be used to stabilize local government financing and support essential local services.

The government invites feedback from homeowners, local authorities, tax experts, legal professionals, and property industry stakeholders on the consultation’s proposals and the detailed design of the surcharge.