Mansion tax for £2m plus house threat

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

Owners of properties valued at over £2m could face an annual tax charge if chancellor goes ahead with rumoured plans of a mansion tax.

The latest pre Budget rumour is a move to reinstate a years old plan to charge wealth home owners an additional annual 1% property tax on the value in excess of £2m in addition to council tax.

This is not the first time a mansion tax has been suggested, it has been picked up and dropped both by the Lib Dems and Labour numerous times since 2010, when they were in opposition.

The Liberal Democrats included a mansion tax in their 2010 manifesto, but this idea was rejected by the Conservative coalition partners.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: ‘This isn’t the first time a “mansion tax” has been part of the debate. Mansion tax speculation is profoundly distressing for older people, who are property rich and cash poor.

‘They’re worrying about the prospect of a whole host of options that could mean more tax if they stay in their home, and more tax if they downsize to something more affordable.

‘Regardless of whether any of these changes actually make it to the statute books, they are taking a toll on people’s peace of mind.’

The Treasury refuses to comment on any speculation about the Budget, stressing that the chancellor, Rachel Reeves, will only reveal her tax plans on 26 November.

The mansion tax is just part of a clamour for so-called wealth taxes but experts say wider reform of property tax and stamp duty land tax (SDLT) would make more sense.

Hilesh Chavda, partner at law firm Spencer West LLP said: ‘The mansion tax proposal reflects a growing focus on wealth-based levies. While framed as a fairness measure, it risks creating uncertainty in the housing market and is likely to deter investment or distort the market further.

‘A more coherent approach would involve comprehensive property tax reform, such as rethinking SDLT and council tax, rather than isolated levies.’

Ministers have been bombarded with questions about a mansion tax, with housing minister, Steve Reed taking the brunt of the questioning when appearing on the BBC.

When pressed on the issue, Reed said: ‘You will know it is not possible for cabinet members to speculate one way the another on decisions that are rightly the chancellor’s, you are not going to tempt me to comment on things that are going to be in the Budget that we will find out very soon.’

At prime minister’s questions on 29 October, Keir Starmer refused rule out breaking manifesto tax promises saying: ‘No prime minister or chancellor will ever set out their plans in advance.’

The latest survey on tax issues before the Budget found that 69% of the public supported the idea of a mansion tax on homes worth more than £2m with only one in five against the idea in a YouGov survey this week.

A wealth tax of 1% on assets above £10m and 2% on assets above £1bn was also supported by 75% of people while 56% wanted reform of council tax to reflect actual house values.

With the chancellor insisting that ‘those with broadest shoulders should pay fair share of tax,’ she is also mulling the idea of a national property tax to run alongside stamp duty. This property tax would not replace SDLT on owner-occupied homes, but would be a brand new tax on the sale of homes worth over £500,000.

SDLT is a major revenue earner for the Treasury, bringing in £13.88bn in the 2024-25 tax year, and this figure was up 20% in just one year from £11.61bn in 2023-24.