Foreign homeowners could face significantly higher tax bills under new Government plans.
Some may even be charged twice on the same property.
Overseas homeowners could be hit with a “double whammy” under Labour’s planned mansion tax, facing two separate charges on the same property.
The Treasury has confirmed that overseas owners who hold UK homes through companies will have to pay both the existing Annual Tax on Enveloped Dwellings and the new high-value council tax surcharge when it is introduced in 2028.
Responding to a parliamentary question, Exchequer Secretary Dan Tomlinson said: “If a residential property currently attracts the ATED and is above the threshold for the high-value council tax surcharge, it will pay both.”
The mansion tax, announced by Rachel Reeves, will apply to properties worth more than £2million and could add up to £7,500 a year to council tax bills.
More than 5,000 properties valued above £500,000 currently pay ATED, with annual charges reaching up to £303,450 for homes worth £20million or more.
George Osborne introduced this levy in his 2012 Budget, originally targeting properties exceeding £2million in value. The threshold was subsequently reduced to £1million in 2015 and then £500,000 the following year.
The tax targets residential properties held by companies, partnerships with corporate partners, or collective investment schemes, though landlords can claim exemptions.
London dominates the ATED landscape, with over 80 per cent of affected properties located in the capital. Westminster and Kensington and Chelsea account for the highest concentrations.
More than 5,000 properties valued above £500,000 currently pay ATED
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GETTYThe charge generated £132million for the exchequer during the 2023-24 tax year.
The mansion tax will operate across four price bands, with charges starting at £2,500 for properties valued between £2million and £2.5million, rising to £7,500 for those exceeding £5million.
Properties in council tax bands F, G and H will undergo revaluation to determine which bracket they fall into.
The Office for Budget Responsibility estimates that 165,000 homeowners will face the levy when it begins in 2028, increasing slightly to 167,000 by 2030-31.
Homes worth £1million or more in Scotland are also set to face higher council tax under new ‘mansion tax’ style plans | GETTY
However, the official forecaster issued a warning this month that 40 per cent of homeowners who contest their property’s valuation band could succeed in overturning the charge.
The breakdown shows 71,000 properties in the lowest £2million to £2.5million band, with 15,000 homes valued above £5million.
Nimesh Shah, of accountancy firm Blick Rothenberg, said: “When [the Government] introduced the high-value council tax surcharge, no one thought about ATED. We’ve created another layer of complexity and taxes, which has created more friction in the property market.”
Paul Holmes MP, shadow minister for Housing, Communities and Local Government, said: “It’s right that overseas buyers pay their fair share, but the Treasury’s own admission exposes a muddled approach at the heart of the Government’s housing policy.”
The original ATED was designed to tackle loopholes exploited by foreign buyers to sidestep stamp duty
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GETTYThe original ATED was designed to tackle loopholes exploited by foreign buyers to sidestep stamp duty.
Overseas investors would acquire shares in offshore companies owning UK properties rather than purchasing directly, also avoiding inheritance tax until rules changed in 2017.
A Treasury spokesman defended the policy, stating: “This Government is addressing a longstanding unfairness in our country, where a Band D home in Darlington or Blackpool pays nearly £300 more in council tax than a £10million mansion in Mayfair.”