Chancellor Rachel Reeves is lining up a new mansion tax on homes valued above £2m — a move that could hit more than 100,000 properties and inject fresh uncertainty into London’s already fragile prime housing market.
Reeves had originally floated an annual council tax surcharge for homes over £1.5m, but the plan has reportedly been scaled back after pushback from Labour MPs representing wealthy London constituencies. Some were said to favour an even higher threshold of £2.5m.
Even in its trimmed form, the policy is expected to raise up to £450m a year, according to those familiar with Budget preparations.
Savills estimates around 145,000 homes across Great Britain sit above the £2m mark, with the bulk concentrated in London and the south-east.
The mansion tax would sit on top of existing council tax bills and will be accompanied by a long-awaited revaluation of properties in bands F, G and H — the first overhaul of these upper tiers since 1991.
“This policy treats paper wealth as though it’s liquid cash, and the two simply aren’t the same,” said Amy Reynolds, head of sales at Antony Roberts estate agents. “Many owners of £2m homes aren’t high-income households – they’re long-term owners who’ve benefited from inflation, not vast salaries. By taxing them as if they’re cash-rich, the government risks paralysing exactly the part of the market that needs to move.
He added: “For those buying at £2m and above, there’s already a substantial upfront tax in stamp duty; now they’re being asked to shoulder an ongoing levy as well. How many times can the same pound be taxed? At some point, those with the broadest shoulders simply leave – and when they do, it’s the middle classes left behind who end up squeezed the hardest.”
Dominic Agace, chief executive of Winkworth, believes that property owners at this level certainly already pay their fair share of tax in the form of stamp duty. But if the government does opt to bring in a further tax, he is pleased to see the reported threshold moved up from £1.5m to £2m.
However, the mooted move will create more uncertainty at the highest end of the property market, due to its predicted escalatory nature, at a time when the market is already under pressure as a result of Budget speculation since the summer, according to Agace.
He added: “Guidance will need to be provided swiftly on the highest potential tax charge, so everyone can adjust accordingly. With non dom tax changes, VAT on school fees and mortgage rate increases, this will just add to more pressure on those living in these homes worth £2m upwards, particularly in London where owners may have leveraged up to buy them.”
What does Rachel Reeves have planned for the property market ahead of the Budget?
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