The Running Costs of a London Flat: Service Charges, Ground Rent, Council Tax and Insurance
For many owners of a London flat, the largest yearly cost is the service charge, your share of what it costs to run, repair, insure and keep safe the building. In 2025 the London average for flats listed for sale was £2,801 a year, about £233 a month, up 6.4% on the year and 41.2% over five years. Council tax is charged on top, and an owner who keeps the flat as a furnished second home can pay double the normal bill in boroughs that charge the second-homes premium, as Camden and Tower Hamlets do.
Ground rent is usually nothing on a new lease, because most long leases granted since 30 June 2022 are limited to a peppercorn. Buildings insurance is normally inside the service charge. Beyond those lines, the costs depend on how you use the flat: a landlord pays tax on the rent and may need a licence, and a company owner pays an annual tax on homes worth over £500,000.
All tax figures here are as of October 2026, before the Autumn Budget on 28 October 2026. The High Value Council Tax Surcharge discussed below has been announced but is not yet law.
Service charges: often the largest line
Across England and Wales the average service charge was £2,405 a year in 2025, up 4.6%, against £2,801 in London. The London figure is an average over flats of every age and type, and the range around it is wide. New-build towers with a concierge, a gym and similar facilities generally carry higher charges than a converted house or a small block.
The charge matters for more than your yearly budget. In 37% of flats the annual service charge is above 1% of the flat’s value. Some mortgage lenders have tightened their criteria above that level, and flats with high charges have been harder to sell. A buyer who plans to resell, or to remortgage, should look at the charge as a share of value as well as in pounds.
For a new build there is no history to look at, only a budget. Ask the developer for the budgeted service charge per year and per square foot for the specific block, what it includes, and whether a reserve or sinking fund is being built up. A first-year budget is an estimate, and later years can differ from it.
What the service charge pays for, and the rules coming in 2027
The service charge is your share of the building’s running, repair, insurance and safety costs, and in a tower with a concierge or a gym it pays for those too. In a higher-risk building under the Building Safety Act 2022, at least 18 metres or seven storeys with two or more homes, the Accountable Persons must assess and manage fire and structural risks, prepare a safety case report, keep the “golden thread” of building information and run a residents’ engagement strategy. The cost of that work typically flows into the service charge, so ask how much of the budget relates to it.
Leaseholders are due more information soon. On 15 July 2026 the government confirmed an annual building report from landlords, a standard service charge demand form, protection against paying landlords’ legal costs without a court or tribunal check, and a right to building information going back up to six years. These are expected as soon as possible from 2027, through secondary legislation. Rules on the commissions landlords and agents take on buildings insurance need further consultation.
Until those rules start, the lease is the main document that governs what you can be charged, and the 2024 Act’s provisions on service charge disputes have applied since 24 July 2024. Our guide to leasehold and freehold covers the reforms in more detail.
Ground rent: usually nothing on a new lease
Under the Leasehold Reform (Ground Rent) Act 2022, most new long residential leases granted for a premium on or after 30 June 2022 can only charge a peppercorn ground rent, and no fee may be charged for collecting it. The main exception for new-build buyers is a lease granted under a contract exchanged before 30 June 2022, which can keep a ground rent even if the lease is granted later. Your solicitor should confirm which applies.
For existing leases with a ground rent, the draft Commonhold and Leasehold Reform Bill proposes a cap of £250 a year, falling to a peppercorn after 40 years. That is a proposal only: as of October 2026 the Bill had not been formally introduced to Parliament.
Council tax and the second-homes premium
Council tax is an annual local tax set by each London borough, and the bill depends on the home’s valuation band. Owners of second homes and empty homes are liable for it. We do not quote band amounts here, because they differ by borough and are set each year; your solicitor or the borough’s website gives the figure for a specific flat.
Since 1 April 2025, councils in England can charge a premium of up to 100%, meaning up to twice the normal bill, on furnished homes that are nobody’s main residence. Long-term empty homes can carry premiums after one year, rising to up to four times the bill after ten years. In London, Camden applies the 100% second-homes premium from 1 April 2025 with no waiting period, and Tower Hamlets also adds 100%, for a total of 200%. Each borough decides for itself, so check with the borough for any flat you consider.
There are mandatory exceptions, including homes actively marketed for sale or to let, for up to 12 months. If the flat is let, who pays the council tax depends on the letting arrangement; confirm it with the borough and the letting agent before you budget.
The High Value Council Tax Surcharge: a proposal for homes over £2 million
At the Autumn Budget on 26 November 2025 the government announced a High Value Council Tax Surcharge, often called a “mansion tax”. It is intended to start in April 2028 and would be paid by the owner, not the occupier, of a home in England worth £2 million or more, on top of normal council tax. Values would be set at 2026 levels by a Valuation Office exercise and revalued every five years.
| Property value (proposed bands) | Proposed annual surcharge |
|---|---|
| £2 million to £2.5 million | £2,500 |
| £2.5 million to £3.5 million | £3,500 |
| £3.5 million to £5 million | £5,000 |
| Over £5 million | £7,500 |
The amounts would rise with inflation. The consultation ran from 19 May to 14 July 2026, and the government has not yet responded. It also explored an extra premium for non-UK resident owners, without giving detail. A cut in the threshold to £1.5 million is not expected. The surcharge is not law, and the Budget on 28 October 2026 may say more.
Insurance and the warranty
Insurance of the building is one of the costs the service charge pays for, so read what the building’s policy covers before you buy any cover of your own. What else you insure depends on how you use the flat. For contents or landlord insurance, get quotes for the specific flat.
A new flat also comes with a 10-year warranty, such as NHBC’s Buildmark, but it is not buildings insurance. In years one and two the builder must put right defects you report, and in years three to ten it insures against damage caused by defects in specified parts such as the structure, subject to a minimum claim value. It does not replace an insurance policy.
The full picture
| Cost | Who it applies to | What it amounts to |
|---|---|---|
| Service charge | Every leaseholder | London average £2,801 a year in 2025 |
| Ground rent | Leaseholders | A peppercorn on most new leases since 30 June 2022 |
| Council tax | Owner or occupier, by borough and band | Up to a 100% premium on furnished second homes |
| High Value Council Tax Surcharge | Owners of homes worth £2 million or more | Proposed £2,500 to £7,500 a year from April 2028; not law |
| Income tax on rent | Landlords | 20% withheld under the Non-Resident Landlord Scheme; 22% from April 2027 |
| ATED | Companies owning a home over £500,000 | From £4,600 a year in 2026 to 2027 |
For landlords, the rent is taxed through the Non-Resident Landlord Scheme, under which an agent deducts basic-rate tax before paying you, and a borough licence may be needed. A mandatory national landlord database with an annual fee is due to roll out regionally from late 2026, with the fee not yet set. Companies pay the Annual Tax on Enveloped Dwellings on homes worth more than £500,000. Our guides to renting out a London flat and taxes for overseas owners cover both.
Before you buy: questions to ask
- What is the budgeted service charge for year one, per year and per square foot, and what does it include?
- How much of the budget relates to building-safety duties, and is a reserve fund being built?
- Is the service charge above 1% of the flat’s value?
- Is the ground rent a peppercorn, and if not, why not?
- Which borough is the flat in, does it charge the second-homes premium, and who will pay council tax if the flat is let?
- Could the flat be worth £2 million or more at 2026 values, bringing it within the proposed surcharge?
- Who arranges the buildings insurance, and what does the policy cover?
- Did the Budget of 28 October 2026 change any of the figures above?
The London homes we currently work with are on our properties page, and the full series is in the United Kingdom section.
