The Treasury is expected to see a short-term reduction in tax receipts ahead of the introduction of Labour’s high-value property levy, according to estimates.
The policy – a council tax surcharge on homes worth more than £2m, often referred to as a “mansion tax” – was outlined by chancellor Rachel Reeves in the Autumn Budget last November.
Reporting by The Times, citing Treasury analysis, suggests that receipts from stamp duty and inheritance tax linked to high-value properties are expected to decline in the period leading up to the levy’s introduction. This could result in a net fiscal impact before any revenue is generated.
Under current plans, the surcharge will apply from April 2028 to residential properties in England valued above £2m, payable in addition to standard council tax.
Officials estimate that stamp duty and inheritance tax receipts could fall by £230m over the next three years, partly reflecting downward pressure on prices around the £2m threshold.
The government is also expected to incur around £150m in costs to identify and value affected properties, taking the total upfront impact to at least £380m before any revenue is generated.
The levy will be structured across four bands, based on property value. Homes valued between £2m and £2.5m will incur an annual charge of £2,500, rising to £3,500 for those worth up to £3.5m.
Properties in the £3.5m to £5m range will face a £5,000 annual charge, while homes valued above £5m will be subject to a £7,500 levy.
Agents report that the proposed changes are already influencing activity at the top end of the market ahead of the 2028 implementation date.
Aneisha Beveridge, head of research at Hamptons, told the press: “Losing only 1.5% of sales feels like quite a small figure.
“Our analysis suggests the mansion tax is already shaping behaviour for both buyers and sellers, particularly around the £2million entry point.”
Buyers are reportedly increasingly structuring offers to keep prices below the £2m threshold, while listings between £1.8m and £2m have risen 6% since the Budget. In contrast, properties marketed between £2m and £2.2m have fallen by 7% over the same period.
Treasury projections suggest the levy could generate around £1.4bn in its first three years, with a net return of £930m by 2031 after costs and reduced receipts elsewhere.
The policy is expected to affect around 156,000 homeowners, with typical annual charges of about £3,000.
Some agents and homeowners are concerned that the threshold may be lowered in future.
Beveridge said: “When governments bring in thresholds like this, generally they tend to come down.
“So we could see future governments tweak the £2million level just to pull in more tax.”
Read the orginal article: https://propertyindustryeye.com/labours-mansion-tax-set-to-cost-nearly-400m-upfront-before-generating-income/?utm_source=rss&utm_medium=rss&utm_campaign=labours-mansion-tax-set-to-cost-nearly-400m-upfront-before-generating-income
