A new tax announced in the UK Budget could see owners of higher value homes pay a £7,500 surcharge.
Chancellor Rachel Reeves confirmed the tax at the despatch box today (26 November).
Property valuations will be conducted by the Valuation Office in 2026, with owners of homes worth £2m to £2.5m set to pay £2,500 and owners of homes worth £5m or more paying £7,500. The levy kicks in from April 2028 and will be collected alongside council tax.
David Little, partner in financial planning at wealth management firm Evelyn Partners, suggested the tax could just be a move to appease Labour backbenchers and trade unionists who had been calling for a wealth tax.
“As with a broader wealth tax though, property taxes are fraught with difficulties, not least around the valuation of assets,” he said. “There will no doubt be a host of objections from property owners, not just around the £2m mark but across those three bands.
“It is very often the case that behavioural responses mean tax rises result in less revenue than expected, while causing other sometimes unexpected market distortions, and we suspect that could well be the case here.”
Keri-Ann Osfield, chief financial officer at Multrees Investor Services, warned the tax could have severe repercussions.
“A mansion tax may secure short-term revenue, but it risks inflicting long-term damage on the UK’s financial ecosystem,” she said.
“If affluent clients begin reassessing their UK presence, the consequences won’t stop at property values: the departure of wealth also means fewer assets managed onshore, weaker flows into UK investment platforms, and growing pressures on the myriad advisers, asset managers, family offices, and tax firms.
“These are the foundation of Britain’s wealth management ecosystem – and their erosion risks dulling the UK’s edge as a global financial hub.”
Sarah Coles, head of personal finance, Hargreaves Lansdown, said there would be no guarantee that those in more expensive properties can afford a bigger monthly bill.
“Those who are property rich and cash poor could end up stuck in a home that no longer meets their needs, facing a lower standard of living because of something they had no control over,” she said.
“It could take a toll on house prices for pricier properties, because people could be wary about buying a home with such a large council tax bill attached. If this makes the top of the market more sluggish, it will feed down gradually to cheaper homes and could hold up sales across the market.”
However, Jack Fletcher-Price, equity analyst at Morningstar, is doubtful the changes will take effect.
“If the mansion tax is scheduled for 2028, we expect the Conservatives and Reform to pledge its abolition at the next general election, making it unlikely to ever come into effect,” he said.
