Properties worth more than £2m in England face new tax

Thousands of owners of properties worth more than £2m in England are to face a surcharge of at least £2,500, dubbed mansion tax, from 2028.

The annual charge will come on top of existing council tax, and will increase depending on the price of the property – with four different bands.

The lowest band covers properties valued between £2m and £2.5m, while the highest fee of £7,500 will apply to homes valued at £5m or more. The majority of the affected properties are in London.

The Office for Budget Responsibility (OBR) expects the measure to raise around £400 million per year by 2029–2030.

high value council tax surcharge The tax increase on properties worth more than £2 million is part of a series of tax rises included in Chancellor Rachel Reeves’s budget to allow her to meet her self-imposed financial rules.

Announcing the change, the Chancellor said she was “taking further steps to tackle a long-standing source of wealth inequality in our country”.

The Treasury says it expects the measure to apply to less than 1% of properties in England.

Reacting to the announcement, estate agents Savills said it was “probably the worst possible outcome for major property owners”.

It added that the impact on the housing market would be “much less severe” if an “open-ended mansion tax” were implemented.

Savills said certainty on the issue now is likely to boost the housing market, and in the long term will act as an incentive for older home owners to downsize.

• properties appraised £2m to £2.5m will pay £2,500
• properties appraised £2.5m to £3.5m will pay £3,500
• properties appraised £3.5 million to £5 million will pay £5,000
• The value of the assets is more than £5 million will pay £7,500

While the charge is levied on top of existing council tax, the money will go to the Treasury rather than the local authority.

In its assessment of the tax, the OBR said it expected that as the tax would begin to be reflected in the price of properties, “the price would be well below each band threshold”.

This refers to the incentive to value an asset just below the price at which it would be liable to duty – something that “reduces the estimated yield by reducing the number of assets within the scope of the measurement”.

The band over which properties are liable to duty will increase in line with inflation.

In its assessment, the OBR said there was a “high” degree of uncertainty in the cost of the new surcharge.

The Government will now consult on what reliefs and exemptions will be made – including for people who have to live in a high-value property as a result of their job.

The properties will be valued based on the 2026 valuation provided by the government’s Valuation Office agency.

While council tax bands are not going to change, the government will look at properties in the three highest bands of F, G and H to see if they are valued at more than £2 million.

There have been calls for reform of the council tax system as it is currently based on property values ​​in 1991.

In its Green Budget, the Institute for Fiscal Studies think tank described the revaluation of council tax bands as “long overdue”.