Of the many rumoured changes to the system of property taxation, the mansion tax – or ‘high value council tax surcharge’ – was the only significant measure introduced by the chancellor in her autumn budget.
From 2028, an annual ‘high value council tax surcharge’ of £2,500 for properties worth between £2-5 million and £7,500 for properties worth over £5 million will be collected through the council tax system. The changes will affect less than 1% of properties and are set to raise over £400 million by 2031.
Although the introduction of the tax was widely expected, and less popular measures such as doubling the rate of council tax for properties in the highest bands failed to materialise, the announcement has been greeted with resounding scepticism.
Experts have questioned the fairness of the tax, which will disproportionately impact homes in the south of England, while pointing out that many home owners with properties over the £2 million threshold are older people who will struggle to pay the premium.
‘The thresholds presented by the chancellor mean there could be inequity’, said Michael Shapiro, partner at Spencer West LLP.
“In some areas of the country, £2 million would buy a nice country house befitting of the term “mansion”, but in central London, you might only expect a 2-3-bedroom flat in a mansion block.”
‘Many older homeowners are asset rich but cash poor and will struggle to pay the high value council tax surcharge without compromising lifestyle objectives’, said Will Hale, CEO of later life finance specialists Key Advice & Air.
“This new tax will undoubtedly put considerable financial strain on many older people who have lived in their homes for many years but who don’t have enough income to pay additional taxes.”
‘The introduction of the much-rumoured ‘mansion tax’ is a Treasury raid on those who have seen their property value increase in over recent years’, agreed Leon Diamond, CEO at LiveMore Mortgages.
“As we said before the budget, this will disproportionately affect older homeowners with larger properties, many of whom are asset-rich but cash-poor. This could see many older people stuck in a home that no longer meets their needs as a result of the tax, facing a lower standard of living because of something they had no control over.”
The immediate result, said HomeOwners Alliance CEO Paula Higgins, will be ‘a freeze at the top end of the market’. She added:
“We need to remember that people living in high-value homes aren’t always cash-rich. Many are stretched, still paying big mortgages, and have simply ridden a wave of rising prices. A mansion tax would freeze investment in homes over £1million overnight, as owners hold back on improvements to avoid being pushed over a threshold the government will almost certainly freeze.”
How the new tax will be implemented has also raised questions from experts. ‘We’ll wait to hear further details about how the high value council tax surcharge – or mansion tax – will be set up in the planned public consultation in early 2026’, Higgins said.
“But our initial response is we’re sceptical about whether the revaluation needed for this mansion tax can be delivered cleanly and on time. A mass revaluation of bands F to H will inevitably trigger large numbers of appeals. Without clear valuation rules, adequate resourcing, and a straightforward process people can trust, this risks becoming chaotic, slow, and deeply contentious.”
‘From a legal perspective, much remains uncertain’, said Simon Main, partner at UK law firm Cripps.
“Key questions, such as how properties will be valued, who will carry out the valuations, and who will bear the costs, suggest the application of any such levy will be fraught with difficulties.”
Jennet Siebrits, head of research at real estate asset manager Ringley Group agreed:
“The logistical challenge of revaluing homes in the top three Council Tax bands (F, G and H) cannot be overstated: any valuation would need to be highly detailed to withstand legal challenge, and owners of properties near the thresholds will inevitably contest them.
Higher-value homes are notoriously complex to assess because they lack uniformity, and placing a property just above a threshold could itself depress its market value. That dynamic risks destabilising the very top end of the housing market, where downward pressure is already evident, and could ripple through to wider market stability.”
Craig Hughes, partner and head of private client services at Menzies LLP, said the mansion tax will introduce further complexity into the property market and result in unintended consequences for homeowners and the wider economy. He explained:
“High-value properties often form part of long-term financial planning, and repeated changes to the tax regime create uncertainty for both current owners and prospective buyers. This uncertainty risks discouraging investment, which could slow activity in the upper tiers of the housing market.
“The revenue generated is modest relative to the overall tax base, and yet the broader economic effects – such as reduced mobility, increased transactional friction, and potential downward pressure on property values – may ultimately outweigh the fiscal benefit. In the long run, the burden of this policy is likely to extend beyond affluent homeowners and could indirectly affect the entire housing market.”
‘The property market needs less taxation not more, to encourage and enable movement’ said Colleen Babcock, Rightmove’s property expert. Agreeing that the tax could distort the market, she added:
“Even if some wealthier buyers are unfazed by an additional cost, we could see some fall-throughs as others in this price bracket reconsider the long-term implication of their purchase. Sellers of homes priced very close to the £2 million mark may need to ask for £1.99 million to avoid putting off potential buyers. And retired homeowners who benefitted from house price inflation may face the difficult decision of whether they can afford the annual upkeep of a £2 million home.
“Importantly, while this likely very complex tax aims to target the £2 million and £5 million price sectors, there is an inevitable trickle-down effect for the rest of the market. Even though our data shows that less than 0.5% of sales would be directly affected, a slower market can affect all types of movers, from first-time buyers to key workers and families.”
Sarah Barnes, head of residential conveyancing at law firm Napthens, acknowledged the tax may act as an incentive for homeowners to downsize and potentially free up the market – but said its impact would be limited. She explained:
“This is more likely to impact a small section of the market, with wider implications potentially resulting in homeowners waiting it out, just in case the policy is deferred or scrapped.
“Property valuations at the lower end may be challenged and create further uncertainty and slow the property market further.
“It would have been more beneficial for the threshold at which stamp duty is charged, to be increased to £250,000 to provide further incentives to those on the first rung of the housing ladder.
“Rather than focussing on a mansion tax, this would have created momentum, which will now be further stifled due to the freeze to tax thresholds and cost of living generally.”
However, Andrew Lloyd, managing director at property data insight and technology provider Search Acumen, welcomed the surcharge, which he said ‘signals a desire to redistribute regional mobility and bridge the wealth divide, rather than create transactional peaks and troughs like a stamp duty change would have likely had’.
“Whilst this will be difficult to implement, the three years until it comes into effect will allow careful planning if managed correctly. A fully digitalised Land Registry will certainly aid this process and support the monumental task of revaluations of hundreds of thousands of homes. The concern is how valuations will take place and how legally binding they may be. If we see higher value homes reduce in price over a sustained period of time between now and 2028, there is likely to be some pushback.
“Tinkering with property taxes was always going to divisive, but now that the chancellor has made her choice, the priority must be stability. No u-turns, no prolonged uncertainty: give homeowners the confidence to plan their lives.”
