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The “mansion tax” on more expensive homes announced in the autumn Budget is already causing property sales values to bunch just below the threshold for the new charges, research has found.
The high‑value council tax surcharge (HVCTS) will come into force in April 2028. It will be charged annually at £2,500 on homes in England over £2mn, with higher charges applying above £2.5mn, £3.5mn and £5mn.
The Valuation Office is this year planning to determine which homes fall into these bands — an exercise that will not be repeated for another five years. It will assess sales and stamp duty data, extensions or other major changes made to properties that may have a bearing on its value.
Researchers at estate agent Hamptons found that the prospect of the incoming levy on owners was altering behaviour among both buyers and sellers.
The number of homes going on the market at between £1.8mn and £2mn rose by 5.6 per cent in the two months following the Budget, compared with the same two months in the previous year. At the same time, the number put on sale for between £2mn and £2.2mn fell by 6.5 per cent.
David Fell, lead analyst at Hamptons, said: “If owners were primarily trying to offload properties that might incur the new tax liability, we would expect listing numbers just above £2mn to rise.
“Instead, the decline suggests that some sellers are adjusting asking prices downwards to ensure their properties fall below the threshold where demand now appears strongest.”
More buyers were also ensuring that their offers did not break through the £2mn barrier. So far in February, 83 per cent of offers on homes priced within 10 per cent of the £2mn threshold came in under that mark, up from 64 per cent a year earlier, Hamptons said.
Henry Pryor, a buying agent, said the annual surcharge was not a material sum to most purchasers of homes above £2mn, but there was no guarantee it would not rise in future years. It has also quickly become a useful weapon in the buyer’s arsenal during price negotiations.
“With every negotiation I have had with a seller or selling agent at around this price point, I’ve used it shamelessly to drive the deal down,” he said. “We’ve piled it on with a trowel.”
A similar effect applied at the £5mn threshold, above which owners will pay a £7,500 surcharge annually. The number of homes going on the market up to 10 per cent above the £5mn mark was down 7 per cent compared with the previous year. The band 10 per cent below £5mn saw a 35 per cent rise in the number marketed year-on-year.
Before the stamp duty reforms of 2016, the bunching of values beneath certain thresholds was a well-observed feature of the housing market. The “slab” system ensured that homes above a stamp duty threshold were charged a higher rate for the whole value of the home, not just the part that exceeded the threshold. So buyers sought homes priced just below the mark.
This led some buyers and sellers to agree a deal just below the threshold, but have the buyers pay a substantial sum for the fittings in a property, which were not counted as part of its inherent value for stamp duty purposes. Fell suggested the new surcharge would “reopen the door” to such practices.
However, Pryor cautioned: “There was a time when you could get away with loading pictures, garden statuary, carpets and curtains [on to the fittings payment]. But the revenue now takes a pretty dim view of that and you’d be incredibly lucky to find a lawyer who’d allow you to do it.”
Council tax valuations in England have not changed since 1991, but property prices have subsequently risen at substantially different rates across the country. When announcing the HVCTS, the government said it would “improve fairness in the property tax system”. A public consultation on the HVCTS is due to be held “in early 2026” according to the government.