A new “mansion tax” has been announced by the Chancellor in the Budget which will place a new charge on high-value properties.

Homeowners of properties valued over £2m will from April 2028 be liable for a recurring annual charge on top of their existing council tax liability, Rachel Reeves confirmed in her Budget, which was otherwise short on housing measures.

The valuations used for the mansion tax, which will be according to the Valuation Office in 2026 prices, will have four price bands. The surcharge will rise from £2,500 for a property valued in the lowest £2m to £2.5m band, to £7,500 for a home valued in the highest band of £5m or more, all uprated by inflation each year.

This measure is estimated by the Office for Budget Responsibility (OBR) to raise £400m in 2029/2030, although the revenues will flow to the central Government rather than remain with local Government, as is the case for standard council tax.

Head of personal financial planning at Broadstone, Rob Hillock, commented: “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.”

LiveMore Mortgages CEO, Leon Diamond, called the mansion tax a “Treasury raid on those who have seen their property value increase in over recent years”.

“This will disproportionately affect older homeowners with larger properties, many of whom are asset-rich but cash-poor,” Diamond said. This could see many older people stuck in a home that no longer meets their needs as a result of the tax, facing a lower standard of living because of something they had no control over.

“With income tax thresholds also frozen until 2031, we’ll also see many pensioners dragged into paying income tax – a double whammy for people in retirement.”

Commercial director of surveyor portal Houzecheck, Richard Sexton, suggested the Chancellor could have opted for a stamp duty cut, as opposed to the mansion tax introduction.

“She could have introduced a temporary stamp duty holiday for properties under £750,000 for the next 12 months,” he added. “Historically these boost market activity – just look at the impact this had in 2020 when buyers rushed to complete deals before the due date and sellers list more properties.

“A cut in stamp duty would have signalled government support for brokers, conveyancers and agents. The new mansion tax signals precisely the opposite.”

Deputy CEO at Mortgage Advice Bureau, Ben Thompson, added that aside from the mansion tax, it had been a “fairly quiet Budget for the majority of the housing sector”.

“While the silence around the sector is undeniably disappointing for the millions trying to get onto or move up the property ladder, we need to remain optimistic,” Thompson said.

“Thanks to earlier changes made this year by regulators and lenders, many more people could now move home than this time last year. In fact, we have a very high number of mortgage products available, so there’s still plenty to be positive about.

“There is of course more the Chancellor could’ve announced today, for example, some much-needed changes to stamp duty or a revival of a housing tax relief such as mortgage interest relief at source. However, what we do have now is certainty, improved affordability, falling mortgage rates, and a record number of mortgage products for people to choose from.”

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