The Office for Budget Responsibility has confirmed that the Chancellor will introduce a mansion tax as part of the Budget, in the form of a high-value council tax surcharge applied to properties worth more than £2m.
The measure, which will be introduced by Rachel Reeves later today, is expected to raise £0.4bn, according to the OBR’s analysis. The revenues will go to the Government not loacal authorities.
The confirmation follows the accidental early publication of the OBR’s Budget report, which is normally released only after the Chancellor’s statement has concluded.
Jo Eccles, founder and managing director of prime central London buying agency, Eccord, said: “The continued pursuit of those with wealth is deeply damaging and counterproductive. It doesn’t just impact the ultra-wealthy who are highly mobile and now have another reason to move elsewhere, at a significant loss to the UK economy.
“With the threshold set at £2m, this measure directly impacts London’s upper-middle classes – who are typically households with mortgages and finite resources. Their outgoings can only stretch so far. Sentiment and morale are being pushed even lower, and many of them no longer view the UK as a place for prosperity where hard work and success are encouraged.
“For someone buying a £5m property, this will mean a £30k annual bill, which is equivalent to £50,000 in pre-tax earnings. One city professional told me recently that VAT on school fees alone is costing him an extra £700 a month, and if a mansion tax is added on top he will move to Switzerland. For many like him, this will be the final straw.
“This measure is likely to create a cliff edge at the £2m mark and would effectively freeze the market just above it. We could see pressure on properties above those levels as sellers are forced to shoulder part of the burden by reducing their asking prices. And what about tenants? If this tax is collected through council tax then the liability will sit with them, pushing rents down and further discouraging landlords to stay in the market.”
Jennie Hancock, founder and director of West Sussex buying agency Property Acquisitions, added: “There’s no doubt this measure will have a significant impact on the country homes market in the South East.
“Properties priced between £2 – 4m are already struggling – I’m seeing discounts of as much as 25% for beautiful country houses that buyers would have been queuing up for just three or four years ago. Even with significant price cuts, there’s very little genuine interest. I expect this to worsen, creating a two-tiered market in which demand for higher-value properties falls even further, while the £1 – 1.7m price bracket becomes more buoyant.
“The one silver lining is that the tax won’t come into effect until 2028, which leaves a decent window for downsizers to make their move – and I expect many will, even if they have to take a hit on the price. Retirees on fixed incomes won’t want the burden of an additional annual bill they haven’t factored into their long-term plans.”
Further Reaction
Rob Hillock, head of personal financial planning at financial services consultancy Broadstone:
“The Chancellor’s introduction of a ‘Mansion Tax’ on houses valued above £2m will likely prompt many homeowners to get an up-to-date valuation of their property wealth.
“It has the potential to create market distortions as homeowners look to reduce the value of their home to avoid additional tax or prompt some to downsize to smaller, cheaper homes.
“The OBR notes in its comments that the reform could see price bunching below each of the four new price bands as homeowners look to minimise their tax liability.”
Ryan Brailsford, business development director at Pepper Money, said:
“The Government’s new ‘Mansion Tax’ risks injecting a significant level of confusion and volatility into the property market at a time when stability is sorely needed. Revaluing properties and introducing a surcharge that could affect up to 100,000 homes, leaves many homeowners unsure whether they will be caught by the levy or what the long-term cost implications may be. This level of uncertainty can cause both buyers and sellers to hesitate, slowing transactions and putting further strain on an already fragile market.”
“Crucially, the policy may also have an unintended chilling effect on home improvement. If renovating or extending a property risks pushing it into a higher valuation bracket and triggering a new annual levy, many homeowners may simply delay or abandon investment in their homes altogether. That reduces activity in related sectors and undermines the long-term quality and sustainability of Britain’s housing stock. The impact is likely to be felt most acutely in London and the South East, where property values are higher and tens of thousands could be exposed.”
Mark Hughes, specialist property expert at Pure Property Finance:
“Reeves introducing a ‘mansion tax’ on properties over £2m, coming into play in April 2028, is extremely short-sighted. While this is aimed at higher-valued properties, it risks creating liquidity issues for owners who are asset-rich, but when it comes to cash, actually don’t have that much freedom, forcing sales and destabilising the upper end of the market.
“This new rule could likely ripple down, impacting pricing and confidence across all property tiers. A fairer approach would’ve been preferred, one that stimulates growth not penalises ownership.”
Dave Harris, CEO at more2life,:
“Older homeowners will be feeling the pinch from this Budget, irrespective of the benefits of the Triple Lock on their State Pension.
“Extending the freeze on tax thresholds will drag greater numbers into paying more tax to the Treasury, with more pensioners paying Income Tax on their pension payments, while there is a bigger chance now that homeowners will see expected house price growth pushing their estates into the area of Inheritance Tax payments.
“Couple that with the introduction of the new Council Tax surcharge on high-value properties, and it’s inevitable there will be real concern amongst older homeowners about how best to handle their increased outgoings on tax.
“Being able to tap into their most valuable asset – their home – is only going to become more important due to these rising costs, and we need to ensure they are signposted effectively to advisers so they can get the professional support they need.
“The good news here is the later life lending market has evolved significantly, with a wider choice of flexible product options available which can be tailored to match the older homeowner’s circumstances.
“This Budget, and the specific impact it will have on older borrowers, should serve as a prompt for advisers to communicate with their client base, and ensure they are presented with the full range of potential solutions, rather than a narrow selection of mainstream options.”
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts:
“Limiting the 2028 revaluation only to bands F, G and H will inevitably create new cliff edges between properties in band E and those pushed into higher bands. Homes on the same street will fall either side of an arbitrary threshold, triggering disputes, appeals and a huge amount of administrative red tape – all of which will cost local authorities time and money to resolve.
“And crucially, this partial revaluation won’t even deliver an immediate financial benefit. Because the changes are deferred until 2028, the measure is actually a cost, not a revenue-raiser – yet another layer of bureaucracy with no short-term gain.
“Given that council tax hasn’t been comprehensively updated since 1991, it would be far more sensible to invest the time in revaluing all council tax bands. A full, nationwide update would modernise a system that no longer reflects today’s property market and would deliver far greater fairness between postcode areas, rather than embedding outdated anomalies for another generation.
“After almost three months of political theatre and speculation, this Budget should have offered clarity and direction. Instead, it lands as a damp squib: big build-up, little substance, and no meaningful reform where it’s most needed.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Mansion tax change seems more political than anything bearing in mind the relatively little additional revenue to be raised and the likely deferred payment date. As a result, the impact on housing market activity will probably be minimal at worst.
“However, I wish the Government luck trying to re-value all those properties and dealing with the arguments around the ‘pinch points’. As a result, the cost of the exercise could turn out to be higher than the extra sums making their way into Treasury coffers.
“As is often the case when attempting to analyse the Chancellor’s words on these occasions – it’s just as important what she says as what she doesn’t say.”
Zara Bray, mortgage expert at Quilter:
“The introduction of an annual mansion tax on properties valued above £2 million marks a significant shift in how higher-value homes are taxed. Although the number of affected properties is relatively small, they are heavily concentrated in London and the South East, where prices have long run ahead of local earnings.
The levy relies on property value as a proxy for ability to pay, even though a rising valuation does not guarantee liquidity. Many households in properties above £2 million have seen their home values increase sharply over time without a corresponding rise in income. Treating the property alone as evidence of financial capacity risks placing considerable pressure on those whose wealth is tied up in housing rather than accessible funds.
“Regular revaluations add a further layer of uncertainty. As markets move, homeowners may drift into or out of liability from one cycle to the next, increasing the likelihood of disputes and complicating planning. The measure may also influence behaviour at the margins, encouraging people to delay improvements, postpone moves or hold on to properties that no longer suit their needs simply to avoid triggering the levy. This kind of friction at the top end of the market can ripple through chains, reducing mobility more widely.
“There has long been a case for reforming council tax, which is still based on 1991 valuations and bears little resemblance to modern property markets. However, a complete overhaul would have required a wholesale revaluation of every home in the country and a significant restructuring of how bills are calculated. That is a vast administrative undertaking with substantial political risk. Instead, the government has opted for a narrower, easier-to-implement mansion tax, but bolting it onto an outdated system risks creating more complexity rather than delivering a coherent long-term solution.”
Ric Iannucci-Dawson, CEO of Alto:
“This Budget signals a meaningful shift in how high-value homes will be taxed, and while the changes don’t come into force until 2028, the impact on confidence will be felt much sooner.
“Agents operating in the £2m-plus bracket should expect increased questions from clients around valuations, pricing and future costs, especially as council-tax revaluations begin to bite.
“For the wider sector, the message is the same: clarity and preparation matter. Landlords and homeowners will look to agents for guidance, and the agencies that use data well, to model scenarios, track valuations and explain what the changes mean in real terms, will be the ones who build trust. Today reinforces the need for modern tools that help agents give clearer, faster answers. It’s how the best agencies will stay ahead.”
Simon Bashorun, head of advice at Rathbones Private Office:
“The mansion tax is effectively a wealth tax, disproportionately impacting London and the South East where property values are typically higher. Yet, it is only expected to raise £400–£500 million – a drop in the ocean compared to the multibillion-pound fiscal gap – raising the question: is the juice worth the squeeze?
“The policy is fraught with practical challenges. Valuations will inevitably be contested, and annual assessments for unique, high-value homes are costly and prone to disputes. A surge in appeals could overwhelm government resources, making the system inefficient and expensive to administer.
“Economically, the tax risks creating price cliffs near the threshold, discouraging transactions and renovations. This could stifle housing development and even reduce property tax revenues – undermining the government’s objectives.”
Jonathan Stinton, head of intermediary relationships at Coventry Building Society:
“This new levy will hit the very top end of the market – but the impact could be a lot wider. In London especially, a £2m property doesn’t automatically mean someone is sitting on piles of cash. Many homeowners in that bracket are asset-rich but cash-poor, and a yearly bill could be a real shock to the system.
“Some homeowners in high-value properties may try to sell to avoid the extra cost – but finding buyers for expensive homes isn’t always easy. If those sales do go through, it could unleash a wave of demand for mid-priced family homes as sellers move down the ladder.
“That surge in demand could push up prices in the middle of the market, even as the top end cools. It’s a reminder that changes aimed at the wealthiest households can end up reshaping the whole housing chain.”
