The Chancellor has today fired the starting gun on the most significant shake-up to high-value property taxation in a generation, unveiling a new annual “mansion tax” on homes worth more than £2m.
The move, packaged as a ‘high-value council tax surcharge, is set to take effect from April 2028 and has already sparked warnings of turbulence across the upper end of the UK housing market.
Under the plans, properties valued above £2m (at 2026 prices) will fall into one of four new charging bands. Owners will pay between £2,500 and £7,500 a year depending on value, with amounts uprated annually in line with inflation. Unlike standard council tax, the revenue will be funnelled directly to the Treasury rather than local authorities.
The Office for Budget Responsibility (OBR) estimates the measure will raise £400m a year by 2029-30, though it also expects a knock-on effect: prices of affected homes are forecast to soften, with buyers likely to “bunch” just under each band threshold. High-value property transactions, and the stamp duty attached to them, are expected to fall accordingly.
Chancellor Rachel Reeves said: “I will take further steps to deal with wealth inequality in our country. A Band D home in Darlington or Blackpool pays just under £4,200 in council tax. Nearly £300 more than a £10m mansion in Mayfair.
“From 2028, I am introducing the high-value council tax surcharge in England and an annual £2,500 for properties worth more than £2n, rising to £7,500 for properties worth more than £5m. This will be collected alongside council tax levied.”
While wealthier homeowners shoulder the immediate impact, the OBR cautions that the effects will ripple outwards. Reduced valuations at the top end will dent receipts from stamp duty land tax (SDLT) and capital gains tax in the near term. The Budget contained no new SDLT announcements, but the tax takings will still feel the aftershocks of the mansion-tax-style surcharge and the pre-announced lowering of SDLT nil-rate thresholds from April 2025.
These pressures raise fresh questions about the health of Britain’s property market at a time when activity is already subdued. The OBR’s latest outlook shows house sales running well below earlier forecasts, dragged down by higher mortgage rates, an ageing population moving less frequently, and years of cumulative stamp duty increases.
The Budget delivers a mixed picture for the wider housing sector. Planning reforms continue to form the backbone of the Government’s long-term strategy for boosting supply, and the OBR expects net additions to begin accelerating sharply from 2027. Annual new-build numbers are forecast to hit 305,000 by 2029-30 – levels not achieved in decades – though the near-term supply outlook weakens before the reforms take hold.
House prices are expected to grow modestly, rising from an average of £260,000 this year to around £305,000 by 2030. But property values will face additional downward pressure from another increase in property income tax rates from April 2027, announced in today’s budget.
Landlords are set to pay two percentage points more on rental profits, in a move the OBR warns will further erode returns and reduce the supply of homes to let. The long-run consequence, it says, is likely to be a “steady and persistent” increase in rents.
Zoe Roberts, tax partner at BHP said: “The Chancellor has continued to talk about the ambition to deliver more homes and reform the property tax system. The rumoured mansion tax was confirmed, with it being taken alongside council tax from 2028 and will only target properties valued over £2m, based on a value taken next year.
“Landlords will also be disappointed again, as they now have an extra 2% tax on their income as a result of changes to income tax, however may be relieved mooted Capital Gains Tax changes on property sales did not come to fruition.
“However, landlords and developers may welcome the news of plans to increase planning capacity through a new £48m over the next three years which will be made available to the Ministry for Housing, Communities and Local Government (MHCLG), the Department for Science, Innovation and Technology (DSIT) and Defra.”