Budget 2025: £2.5k mansion tax for expensive houses

Jacob Grattage, Reporter, Business & Accountancy Daily. Croner-i

Anyone with a property over £2m will face annual £2,500 charge chancellor confirms.

The new mansion tax means properties worth over £2m face £2,500 annual charge and £7,500 for £5m plus properties owners from April 2028.

As part of a crackdown on wealth, Rachel Reeves will introduce a high value council tax surcharge in England for residential properties.

According to Treasury documents, the mansion tax is estimated to raise around £430m in tax per year from 2028-29.

This charge will be based on updated valuations to identify properties above the threshold and will be in addition to existing council tax. There are 349,000 properties in London alone valued at £2m.

The Valuation Office will conduct a valuation exercise to identify properties above £2m. The government said fewer than 1% of properties are expected to be above the threshold. Revaluations will be conducted every five years. 

The charges will be levied on property owners rather than tenants, meaning landlords will have to pay the charge, unlike council tax.

Local authorities will collect this tax charge.

In the Budget speech, the chancellor said: ‘A band H home in Darlington pays just over £2,400, the same as a £10m mansion in Mayfair.' 

Opponents to the mansion tax, say it will affect mostly elderly property owners situated in London and the south of England.

Michael Shapiro, partner at law firm Spencer West LLP said: ‘The thresholds presented by the chancellor mean there could be inequity. In some areas of the country, £2m would buy a nice country house befitting of the term “mansion”, but in central London, you might only expect a two-to-three-bedroom flat in a mansion block.

‘My view is that regulations would need to be adapted to reflect the higher value property market in London and other high-value areas of the country.’

A consultation will be issued in the new year; this will include to questions to find out who may need additional support to pay the charge and how to deliver it.

Properties above the £2m threshold will be placed into bands based on their property value. Charges will increase in line with CPI inflation each year from 2029-30 onwards.