High Value Council Tax Surcharge: Design and Delivery

The LGA exists to strengthen local government, so communities thrive. This means championing and being the voice of local government, ensuring it has the resources, powers and support to deliver the best possible outcomes.
This response has been approved by the Lead Members of the LGA’s Local Government Resources Committee and the Chair of the Green Party group.
 

The Government’s decision to use councils to administer the proposed surcharge on high value properties creates a number of challenges for the sector. In particular, the current proposals provide no detail on how income raised from the surcharge will be returned to local government and offer no guarantee that any income returned to councils will be genuinely additional, rather than offset by reductions in other council funding streams.

As proposed, councils will be expected to implement a complex system and will incur substantial but unknown costs. It is likely to be expensive and inefficient to administer and, depending on the sufficiency of implementation funding provided by Government, could generate a net cost to some councils, placing further pressures on council funding for desperately needed local services. It also has the potential to complicate and confuse the system of local democratic accountability. 

Ultimately this is a national tax, and serious consideration should be given to identifying an alternative method for its administration other than through councils. The adoption of a national administration mechanism would also provide Government with a simpler, more flexible fiscal tool should it choose to reform or adapt the surcharge in the future. 

Before addressing the consultation’s specific questions, there are several key points that are important to make.

The surcharge must provide additional funding to local government

The LGA has been clear from the outset that “the founding principle of council tax is that it is a locally accountable tax which has always existed to fund local services. Any additional funding raised through the council tax system must be available to support local authorities”. In this context, all funding raised through the surcharge must be used to provide funding additional to that already announced in the multi-year settlement. 

The Government stated in the 2025 Autumn Budget that, “revenue [from the surcharge] will be used to support funding for local government services, with further detail to be set out at the next spending review”. However, this is not a guarantee that this funding will be additional and will not be offset by reductions to other funding. The 2027 Spending Review (SR) must confirm that this funding will be additional. The SR should also set out a method for allocating this funding to councils in which the new, additional funding is clearly visible.

Confusion over accountability for the surcharge

The level of the surcharge, which properties are liable, and the criteria for support will be decided nationally. However, it is proposed that councils will bill and collect the surcharge, and that it will include “council tax” in its name.  

In this context, there is a clear risk that property owners and local residents in general will assume that the council is responsible and accountable for levelling the surcharge and spending the income. In particular, owner occupiers subject to the surcharge may feel that they are effectively being taxed twice by their council – when in reality the surcharge is a national tax. It is easy to see how this could complicate the relationship between residents and their councils. Ultimately, the proposal to deliver the surcharge through councils risks confusing and undermining the local system of democratic accountability.

To address this, if an alternative to using councils cannot be found to administer the surcharge, it must be transparent in bills and any other material sent to bill payers that the surcharge is a national charge, over which local elected members have no control. Ideally the term ‘council tax’ should be removed from the name of the surcharge – with consideration given to alternative names such as the High Value Property Surcharge. Any correspondence with bill payers should also be clear that funding raised from the surcharge will be sent to the Government, not retained by the billing authority.

A significant administrative burden on councils  

The HVCTS proposals deviate significantly from the current arrangements for council tax. Under council tax, property occupiers are liable, but under the HVCTS it is proposed the liability will be with the property owner.

The difference in liability may create an unwieldy parallel system of administration. In particular, the task of identifying non-resident owners risks becoming a substantial new obligation on councils. This is particularly the case when dwellings are owned by persons or businesses situated outside the UK. If the surcharge is implemented as proposed, the Government must strengthen the powers councils have to enforce against overseas debtors for both the surcharge and the existing council tax system.

We are also concerned that the draft list of liable properties is not planned to be published until late in 2027. This would make it challenging for councils to issue the first bills for the HVCTS alongside annual bills for council tax. The Government will also need to work with the sector to produce clear guidance for all aspects of HVCTS administration, enforcement, and deferral. This guidance will need to be available to councils as soon as possible once the necessary legislation has secured royal assent, so that they can prepare for the publication of the draft list. 

Central government should explore the possibility of commissioning software for administering the surcharge to be made available free of charge to councils. This software should be able to handle all billing, recovery and enforcement activity.

Concerns over new burdens funding

The Government has stated that, “local authorities will be fully compensated for the additional costs of administering this new tax. The government will undertake a new burdens assessment to ensure costs to local authorities are fully funded”.

While this is welcome, the LGA is nonetheless concerned that ‘new burdens’ funding will not fully meet the implementation and ongoing costs of administering the surcharge. Liability based on the owner means that this is effectively a new system. The costs of identifying, and if necessary, enforcing payment on, property owners are unknown. Equally, the likely level and costs of challenges and appeals following the revaluation of these properties is unknown.

If Government does choose to use councils to administer the surcharge despite the clear disadvantages, it must ensure that there is full cost recovery of all ongoing costs. To achieve this, the Government should take the following steps:

• Government should provide an upfront investment of funding so councils can adequately prepare to start the billing process as soon as the draft list of liable properties is announced. 
• Once the first billing cycle has passed, the Government should review the administration process to identify where the system is not working, and if it is possible to simplify administration. 
• There will also need to be ongoing monitoring of the costs incurred by councils, so that payments reflect the true operational, legal and system costs of administering the surcharge. This would also allow the difference between councils in terms of volume and complexity to be reflected. 

Impact on wider council tax reform

Our initial press response indicated that the Government needed to design the HVCTS to "avoid unintended consequences on any future council tax reform". This statement reflects the LGA's wider position that there is a need for consideration of significant reform to the local government finance system. Specifically, the LGA has called for, "a cross-party review of, and debate on, options to improve the local government funding system", and that this should include, "a fundamental review of council tax alongside other council funding sources". 

In this context, not only are the HVCTS proposals a missed opportunity to pursue more meaningful reform to the council tax system, but they may also limit both the Government's and the public's appetite for council tax reform in the future, further delaying the deeper reform the system desperately needs. 

Highly uneven distribution of liable properties across England

Until the publication of the draft list of properties in 2027, it is not clear how many properties are in scope in each billing authority. However, in the absence of this information we can still anticipate that the majority of these properties are likely to be concentrated in a relatively small number of authorities, and that many other authorities may contain no more than a handful.

Government needs to be sensitive to these significant likely differences between council areas. Steps need to be taken to ensure that there is sufficient flexibility in the design of the scheme so that it is sufficiently robust in areas with high levels of these properties, but not disproportionately onerous on areas where there are few of these properties. A system which creates disproportionate costs for areas with relatively low value housing markets would be particularly counter-productive. 

The Government should also be clear whether it intends to uprate the £2 million threshold and the individual bands in the future. This could be done, for instance, annually in line with an appropriate index or alongside the five-yearly revaluations. Leaving the thresholds unchanged will increase the number of properties liable for the surcharge, and push more properties into the higher bands, as property values rise over time. Uprating the thresholds would also reflect the fact that the surcharge itself will increase annually in line with CPI.

In the following sections we respond to the individual questions in the consultation, all of which are focused on the design of a council-administered system for the HVCTS. However, it is important to note that the LGA’s overall position is that the HVCTS is a national tax, and Government should identify an alternative method for its administration other than through councils. 

In this context, our responses to the questions should not be taken as support for or endorsement of a council-administered model. Instead, our responses reflect our interest in ensuring that if a council-administered model is introduced, it is designed in such a way as to limit the cost and complexity of the tasks placed on councils.

Liability and Legal Ownership

Question 1: Do you agree the legal owner should generally be liable for HVCTS?

The Government needs to recognise that the liability being based on the occupier deviates from the liability for council tax. This means that new resources will be required to identify the owners of properties which they do not occupy. This will be very resource intensive for councils to administer.

The LGA is also concerned that the draft list of liable properties is not planned to be published until late in 2027. This would not leave sufficient time for councils to identify non-resident owners or trace owners through complex ownership arrangements. This would mean that councils would struggle to issue bills for the surcharge alongside the annual billing process for council tax. 

It would also be advantageous if the VOA could give councils a rough indication of how many properties are likely to be liable in each area in early 2027. This would support councils to recruit staff and prepare services to bill the surcharge.

Question 2: Do you agree that liability should sit with the leaseholder where the lease has been granted for more than 21 years, or where the law treats a lease as having been granted as such?

The LGA would refer the Government to the replies of member authorities to this question.

Question 3: Are there forms of leases, within or outside of the categories mentioned above, where different treatment should be considered?

The LGA would refer the Government to the replies of member authorities to this question.

Question 4: Do you agree that in trust arrangements trustees should be liable for HVCTS? 

The LGA would refer the Government to the replies of member authorities to this question.

While not relating exclusively to trusts, the Government must also consider who will be liable for the surcharge when the legal owner of a property is deceased, but probate has not yet been granted. The Government should consider if properties owned by deceased households should incur liability to the estate, or if they should follow the practise of exemption as in the council tax system.

Deferral 

Question 5: Do you agree with the proposed income (£35,000) and capital (£16,000) thresholds for deferral? 

The LGA would refer the Government to the replies of member authorities to this question.

However, Government should clarify if income thresholds are net or gross, and whether certain income should be excluded when calculating this threshold. We also note that the income threshold will apply to the entire household, whilst the £35,000 threshold for the winter fuel allowance currently applies per recipient. The Government will need to clarify the rationale for this difference, so that councils can communicate this to their residents.  

Overall, any thresholds must be part of a proportionate, robust deferral framework which supports those who are unable to afford the surcharge. This framework should be set out clearly in secondary legislation and should be regularly reviewed to ensure that the criteria still serve the intended purpose.

Question 6: Do you agree that deferral should be available to homeowners who meet the income or savings thresholds?

Deferral should only be available to homeowners who meet both the income and savings thresholds

Question 7: Do you agree with the proposed disability-based criteria, aligned with existing Council Tax criteria? 

Yes

Question 8: Can you foresee any circumstances where the proposed deferral scheme is not sufficient? Please provide evidence to support your views. 

Some councils told us they are concerned that there may be some property owners who do not qualify under either criterion for deferral, but have other priority financial commitments which mean they do not realistically have sufficient disposable income to pay. The Government should set out in guidance how councils can support households who are ineligible for the deferral mechanism but would otherwise struggle to afford the surcharge in addition to their normal council tax.

This guidance should also give councils discretion to apply the deferral scheme by mutual agreement in certain situations. For example, this could apply if requiring payment of the surcharge would put the household at risk of financial hardship or increase demand on financial support or other council services. This discretion is necessary to avoid councils having to pursue enforcement action to collect the surcharge, when this would undermine councils’ efforts to prevent financial hardship. 

Question 9: Do you agree that change of ownership should be the default end point for deferral? 

Yes

Question 10: For deferred payments, what level should the interest rate be set at? 

As the surcharge will be set by central government, it would be sensible to follow HMRC’s Official Rate of Interest. 

Question 11: What additional resources do you anticipate local authorities may need access to in order to deliver the proposed scheme? 

Councils told us they would welcome the opportunity to work further with the Government to design the administration of the deferral scheme. The scheme should be as simple and automated as possible 

Councils have indicated they are concerned about their ability to recruit enough staff to administer the deferral scheme. Staff will be required to confirm whether households satisfy the criteria for the scheme. Drafting the agreement to defer payment and then secure a charge against the property will require additional capacity in legal services. Our members already struggle to recruit and retain enough staff in legal and revenues teams. Government should explore supporting the sector to recruit, train or upskill staff to be able to deliver these new responsibilities. 

Exemptions and discounts

Question 12: Do you agree with the proposed property types to be exempted from or discounted under HVCTS?

We agree with the proposed properties which would be subject to exemptions or discounts.

However, proposed exemptions or discounts for halls of residence should only apply where a property is exclusively rented to students. In many cases, vacant rooms in such buildings may be rented out to non-students to mitigate potential losses.

Similarly, property owned by a sovereign nation should also only be exempt or discounted if the dwelling is currently being used to accommodate a diplomat who is otherwise exempt from council tax. These requirements are necessary to ensure that these proposals serve their intended purposes.

Question 13: Noting exemptions will only apply to property types with specific characteristics that are unlikely to change, do you have views on which properties in the proposed list should be exempt and which should be discounted? 

The LGA would refer the Government to the replies of member authorities to this question.

Question 14: Is there a case for providing a discount to tied properties?

The LGA would refer the Government to the replies of member authorities to this question.

Question 15: Is there a case for providing a discount to charities where they meet a charitable purpose test? 

The LGA would refer the Government to the replies of member authorities to this question.

Question 16: What types of evidence would it be possible for taxpayers to provide to demonstrate eligibility for relevant discounts? 

Feedback from councils has indicated potential evidence which could be provided for discounts or exemptions in the following categories:

• Halls of residence – The Government should define what is suitable evidence to demonstrate that property is used exclusively by students. For example, this could be its ownership by an educational institution, or a sponsorship agreement with such an institution. The definitions for existing discounts or exemptions for student accommodation are not robust enough to prevent avoidance. The Government should not replicate such uncertainty in the HVCTS system
• Owned predominantly for the accommodation of those seeking refuge from domestic violence - The Government will need to set out whether being owned by a domestic abuse charity is sufficient evidence, or if further evidence of charitable use will be required.
• Property owned by a sovereign nation predominantly for the accommodation of diplomats – Current residents of these properties should qualify for an exemption from council tax due to holding diplomatic privilege or immunity.

Question 17: What additional resources (for example, extra information) do you anticipate local authorities may need in order to assess eligibility for a discount? 

The LGA would refer the Government to the replies of member authorities to this question.

Billing 

Question 18: Do you have views on the proposed system of penalties set out above? What else would most help local authorities administer HVCTS efficiently? 

The proposed system of penalties may be helpful for councils to trace a liable owner who is not the occupier of the property. However, being able to use these penalties effectively will depend on whether councils have the staff time and resources to investigate ownership. Furthermore, our member councils are concerned that where a property is owned by individuals or companies located outside the UK, they will not have the tools to locate or bill these owners. The proposed penalties do little to address this. 

The recovery of council tax debt from overseas parties is also a difficult and costly process. Councils are concerned they will not have the legal powers to recover surcharge debts if owners refuse to pay. The Government should look to strengthen the powers councils have to enforce against overseas debtors for both the surcharge and the existing council tax system.

There are also additional resources which would enable councils to administer the surcharge effectively. Free automated access to up-to-date information on property ownership held by HM Land Registry (HMLR), the Valuation Office Agency (VOA), and HM Revenues and Customs (HMRC) would help councils to identify owners of liable properties. 

HMLR should also automatically notify councils where properties which exceed £2 million in value change ownership. The Government must also remove data-sharing restrictions on the VOA, which prevent them from sharing information held on owners with councils. 

Finally, the processes for reporting and accounting for income should be aligned with council tax as much as possible. This would minimise extra burdens on councils as they collect and remit this funding. 

Question 19: Noting the need to balance fairness with incentivising the provision of accurate information, do you have views on whether the penalty outlined in this section is sufficient? 

The LGA would refer the Government to the replies of member authorities to this question.

Question 20: Would allowing LAs to apply a penalty to other individuals (such as managing agents) to support compliance with information requests help identify hard-to-find owners? If so, what would an appropriate penalty level be? 

Yes, LAs should be able to apply penalties on others. 

Permitting councils to apply a penalty to relevant parties would help councils identify hard-to-find owners. Without this, relevant parties would have no incentive to cooperate with requests for information. Giving councils these powers would make it harder for liable owners to hide behind opaque forms of ownership. 

HVCTS Premium for non-UK resident owners

Question 21: Do you have any evidence on the housing market impacts of non-UK resident owners in high pressure housing markets? 

The LGA would refer the Government to the replies of member authorities to this question.

Question 22: Do you think the government should explore charging additional High Value Council Tax Surcharge premium on non‑UK resident owners of homes liable for the tax? Please explain your answer. 

The LGA believes that it would be appropriate for this premium to reflect where homes are left empty by those speculating on the housing market, whether based in the UK or overseas. This would provide Government with an additional tool to incentivise bringing empty homes into use.

Question 23: What do you think the potential impacts of such a premium could be? 

The LGA would refer the Government to the replies of member authorities to this question.

Challenges and Appeals

Question 24: How easy or difficult do you think it would be for owners to obtain and provide the evidence needed to support a band challenge (for example, similar properties with different bands, or sales information for similar properties from 2026)? 

The LGA does not have a view.

Question 25: Do you agree sharing information earlier in the dispute process about property banding would help to resolve disputes? 

The LGA would refer the Government to the replies of member authorities to this question.

Question 26: What would help homeowners feel confident that a challenge or appeal has been handled fairly and independently, even where the decision is not changed? 

The LGA does not have a view.

Question 27: Do you agree with the approach that homeowners should be able to appeal the VO banding and alterations decision and local authority’s decision on liability to the Valuation Tribunal? 

The LGA would refer the Government to the replies of member authorities to this question.

Enforcement

Question 28: Councils will require powers to enforce payment of the tax.  Do you agree powers should align to those currently available in Council Tax? 

Councils are concerned that the existing mechanisms for enforcement will be insufficient for non-resident or overseas owners. Therefore, we would we support additional powers being considered to strengthen powers against these liable parties. We provide further detail on this point in our response to question 8. 

It is also currently unclear how councils should factor in liability for the surcharge when working to secure payment of unpaid council tax, whether through additional support or formal enforcement action. Councils have a limited number of tools available for households who are unable to pay their bills in full and will have to prioritise collection of council tax. 

While councils will work to agree suitable payment plans or agreements with these residents in line with existing practise, national guidance must set out a realistic approach where councils cannot collect both debts. In certain situations, it may be inappropriate or not possible to move to formal enforcement action without pushing households into hardship. Councils being expected to push residents into hardship to enforce payment of the surcharge would run contrary to the Government’s ongoing reform of council tax collection and enforcement. In such a case, it may be appropriate for councils to be able to mutually agree a deferral agreement, as set out in our response to question 8. 

In assessing whether a taxpayer is genuinely able to pay or not, it would be helpful for councils to have access to Government data on the property owner’s income. This would speed up assessing eligibility for deferrals and allow councils to make an informed decision whether to implement formal enforcement action. 

Allowing councils to make an attachment to earnings for council tax and surcharge liability would support councils to collect funding from those who can afford to pay but choose not to. This has previously been piloted but has remained unrealised. Councils also need improved access to court time for when enforcement action is required. 

Question 29: Do you have views on whether any of the proposals in this consultation will have any disproportionate impacts on persons who share a protected characteristic?

The LGA would refer the Government to the replies of member authorities to this question.