The property industry warns that mansion tax may impact the demand for high value properties, and its effect is likely to be felt more in London.
From April 2028, homeowners whose properties are valued at £2 million or more will begin paying the tax. However, questions are already being raised about how revaluations will be conducted and how owners will respond.
The tax will apply across four price bands, with a surcharge ranging from £2,500 for homes in the £2 million–£2.5 million band, up to £7,500 for homes valued at £5 million or more. All charges change annually in line with CPI inflation.
The government plans to launch a public consultation in early 2026 to define the finer details — including exemptions, reliefs, treatment of ownership structures such as companies or trusts, and possible deferral schemes.
However, uncertainty persists.
Homeowners are on tenterhooks over which of the four tax bands their properties will be bracketed in post revaluation.
During a live Financial Times discussion, one reader asked: “What happens if the value of the property falls in subsequent years? Do you get a refund?”
CEO of the HomeOwners Alliance Paula Higgins told Property118 that the tax could cause an immediate freeze at the top end of the market as buyers and sellers wait for valuations. She also warned that failure to update thresholds could leave more households paying the tax over time.
Managing Director at Fine & Country Jonathan Handford said the government must clearly set out how assessments and disputes will be handled. One of the biggest unknowns, he said, is how homeowners might react.
“There will undoubtedly be conversations about whether properties could be restructured, and we may well see a rise in splitting titles to bring them under the threshold,” he added.
Partner in Financial Planning at Evelyn Partners David Little highlighted the complexity of valuing properties fairly. In a press release he said: “For over 150 years, until the mid-19th century, an effort to levy a wealth tax involved judging the value of properties according to the number of windows they had. So, they bricked up windows. This demonstrates the administrative difficulty of valuing properties, of setting wealth tax levels.”
Little added that behavioural changes among homeowners can mean tax rises bring in less revenue than expected, while also creating unforeseen market distortions.
A North London agent from a prominent property agency noted that many long-term owners, particularly pensioners, now find themselves living in properties worth over £2 million.
“This tax is going to affect the old owners adversely. How the valuation is done will impact the buying and selling. I don’t suppose there will be any immediate effect though,” he said.
Myerson Solicitors offered a contrasting view, suggesting the announcement could stimulate movement in the market. Their press release said they take “an optimistic view that the announcement could pave the way for an upturn in the residential property market, for example older homeowners downsizing.”
The budget’s property-related changes give advisors much to consider, according to IFA, the mortgage and property investment magazine. The industry fears the tax could deter buyers and weaken demand at the top end. The magazine quoted Specialist Property Expert at Pure Property Finance Mark Hughes:
“It risks creating liquidity issues for owners who are asset-rich but, when it comes to cash, don’t have that much freedom, forcing sales and destabilising the upper end of the market.”
The mansion tax marks a major shift in the UK’s property tax landscape, and stakeholders are expected to watch its impact closely. According to Savills, around 145,000 UK homes are currently valued above £2 million. This number is expected to rise by 2028.
The tax is expected to hit London particularly hard. The 1,434 homes sold for more than £2 million across England and Wales so far this year, 66% were in London, News on the Block reported. Eight of the top ten local authorities with the highest number of £2 million-plus sales were London boroughs, The Standard reported.
JLL (global property consultancy) data showed that 68 per cent of £2 million-plus sales in England were in Greater London, with the highest concentrations in Kensington and Chelsea, followed by Westminster and Camden.