For foreign residents, the government is considering imposing an additional "mansion tax"

In addition to the upcoming mansion tax for property owners who do not reside in the United Kingdom, the government has started a consultation process

In an effort to raise more money, the government is thinking about imposing an additional "mansion tax" on property owners who are not UK residents.

The possibility of adding a "non-resident premium" to the High Value Council Tax Surcharge (HVCTS), commonly referred to as the "mansion tax," is examined in a consultation initiated by HM Treasury.

According to the consultation, "There is interest in determining whether demand from non-UK resident owners may be contributing to pressures on housing availability and prices in high-pressure housing markets, particularly in areas like London."

The additional non-resident surcharge is only being contemplated and may not be implemented. The deadline for government consultation is July 14.

Watch the entire video here. An HM Treasury representative stated: "As part of a broader consultation that aims to address a long-standing council tax unfairness in this country, the government is inviting views on whether there could be a case for a non-resident premium.

"We welcome opinions from all interested parties, including whether housing pressures are being exacerbated by demand from non-resident owners."

How would a non-resident premium be applied? What is the mansion tax?

The HVCTS will apply to homes in England valued at £2 million or more starting in April 2028. The fee is due once every tax year.

The surcharge will make the council tax system more equitable, according to the chancellor.

To determine which homes will be subject to the surcharge, HMRC's Valuation Office (VO) is scheduled to conduct a valuation exercise.

A fee of £2,500 will be applied to homes worth £2 million or more but less than £2.5 million.

Properties valued at £2.5 million or more but under £3.5 million must pay £3,500. The cost will be £5,000 for homes valued between £3.5 million and £5 million. A 7,500 surcharge applies to properties valued at £5 million or more.

In accordance with the Consumer Price Index (CPI), a measure of inflation, these fees are scheduled to rise annually. The VO will carry out revaluations every five years.

Regarding the non-resident premium, the government's consultation provides no additional information about how the additional tax would be implemented should it become operative.

What might the premium's impact be?

"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," stated Marc Acheson, global wealth specialist at Utmost, a pension and life insurance company.

More generally, it runs the risk of worsening the UK's standing as a wealth destination and hastening the continuous flight of affluent foreigners that started in earnest after the non-dom regime was abolished at the Autumn 2024 Budget.

"These people are the biggest contributors to the tax base; the economy cannot afford to lose them, and it is extremely difficult to replace them once they depart."

The premium might encourage non-resident property owners considering a sale to list their property, according to Sian Armitage, tax director at tax advisor Mark Davies and Associates.

Armitage stated, "Those who are unsure may treat this as yet another reason to sell, or consider this as an indication of things to come."

But since non-residents would be subject to the levy, Armitage continued, "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."

The director of tax services at the consultancy Henley and Partners, Peter Ferrigno, stated that raising the HVCTS marginally for non-UK residents would be an "inconvenience" but that it was unlikely that the imposition of such a premium alone would be sufficient to force wealthy people to sell.

When taking into account "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," he stated that the greater problem is that they might depart. Who knows what will happen next?

What does "non-UK resident" mean?

Non-UK citizens pay taxes on their income earned in the UK, but not on their income earned abroad. On the other hand, income from both sources would normally be subject to UK tax for a UK resident.

If you spend less than 16 days in the UK each tax year or work overseas full-time and spend less than 91 days in the UK each tax year, with no more than 30 of those days spent at work, you are typically considered a non-UK resident.

For tax years 201314, the statutory residence test (SRT) establishes whether you are a resident of the UK under UK domestic tax law. Visit gov . uk to learn more.