What is the new mansion tax? All you need to know
Owners of properties worth over £2m will have to pay the new charge from 2028
Charlotte DuckFri 28 November 2025 at 1:00 am GMT-5
4 min read
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Chancellor Rachel Reeves has announced the introduction of a new "mansion tax" on properties valued at £2m and over as one of the measures unveiled in her autumn budget.
It’s estimated that around 0.4% of properties, about 145,000, according to Savills, will be affected by this extra fee, which the government is describing as a "high value council tax surcharge".
Unlike council tax, however, the extra money will not go to local councils but directly to the Treasury. The Office for Budget Responsibility (OBR) expects this new tax to raise about £400m a year by 2029-2030.
How much is mansion tax and who pays it?
The new mansion tax will be brought into operation in 2028, giving those who need to pay it the chance to prepare, and the government’s Valuations Office Agency the opportunity to assess which properties will be liable.
Pre-budget, there were rumours that a mansion tax would be paid at a rate of 1% over £2m, but, instead, the government has opted for four flat annual rates.
This option is unavailable due to your privacy preferences. Please update your privacy settings to enable it.The rate you pay is dependent on a property’s value – owners of homes worth £2m to £2.5m will pay £2,500; those with properties valued from £2.5m to £3.5m will pay £3,500; those from £3.5m to £5m will be charged £5,000 and those over £5m, £7,500 a year.
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“[This] is one of the most significant changes to the UK housing market for decades,” says Nick Leeming, chairman of estate agent Jackson-Stops. “For every high-end homeowner moving out, you also need someone to move in. By choosing an annual council surcharge that stays with the house, it has the ability impact both buyers and sellers, creating an uncertain outlook for prime houses.”
Unlike council tax, which is paid by whoever is occupying the property whether they own it or are tenants, mansion taxes will only be paid by owners, so landlords of high value properties will have to find these extra fees.
“Those hit hardest will be ‘empty nesters’ and people who bought their property decades ago simply as a family home, not as an investment,” says Scott Clay, director at Together. “Asset-rich but cash-poor older homeowners could really struggle, as this tax could be equivalent to an entire year’s state pension.”
When will properties be valued?
The Valuations Office Agency will value all the properties that could potentially meet the £2m threshold in 2026. While council tax bands are not going to change, the agency will look at homes in the three highest bands of F, G, and H to see if they are worth over £2m.
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These valuations will not be straight-forward, says Leeming. “As it stands, questions will be raised about valuation accuracy, how homes are assessed, and whether this could spark legal challenges. Taking the time to get the revaluation process correct before the 2028 implementation deadline will be absolutely key to its success, where one legal challenge may open the floods gates to others.”
“Higher-value homes are notoriously complex to assess because they lack uniformity, and placing a property just above a threshold could itself depress its market value,” flags Jennet Siebrits, head of research at Ringley Group.
What will be the effect on the property market?
Unsurprisingly, the majority of £2m+ properties are in London and the surrounding South East so this is where the impact will be most keenly felt. Data from real estate services company JLL shows 68% of £2m+ sales in England were in London with the highest proportion in Kensington and Chelsea.
“With the threshold set at £2m, this measure directly impacts London’s upper-middle classes – who are typically households with mortgages and finite resources. Their outgoings can only stretch so far,” says Jo Eccles, founder of Eccord Buying Agency.
This option is unavailable due to your privacy preferences. Please update your privacy settings to enable it.The new tax is also likely to lead to a "bunching up" of properties just under the £2m threshold. “The price range of £1.5m to £1.75m will see much increased activity and likely the most growth in capital values as trading volumes increase,” says Marc Schneiderman, director at Arlington Residential.
It’s also likely that there will be a rush of people wanting to sell affected homes before the tax comes into play in 2028.
“A mansion tax or similar annual levy on high-value homes would almost certainly cool demand above the threshold and push activity below it,” says Paul Drummond, CEO and co-founder of Swoople. “Sellers of £2m+ homes may feel pressure to adjust pricing or bring moving plans forward, while properties just under that line become even more attractive.”
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It’s also likely that the future will see an increasing number of properties liable for the tax.
“Over time, more properties will get dragged into the mansion tax net, which means the proportion of terraced houses, flats and semi-detached homes will grow, particularly in the capital,” says Tom Bill, head of UK residential research at Knight Frank. “The term ‘mansion tax’ could increasingly feel like a misnomer.”
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