Mansion Tax: What does Rachel Reeves's new property tax for expensive houses mean for you?

Owners of high-value homes will be hit with a yearly mansion tax charge from April 2028, Rachel Reeves confirmed in today's Autumn Budget.

Reeves used her Autumn Budget to reveal details of a much-anticipated mansion tax on homes in England worth £2 million or more. The money will be collected through council tax and is expected to raise £400 million for the Treasury.

Reeves claimed that the charge will make the tax system fairer. “A typical family home in England pays more council tax than a £10 million Westminster mansion, so the Budget also introduces a High Value Council Tax Surcharge on homes worth more than £2 million, while protecting those on low incomes," she said in her speech.

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But there are warnings that the charge could stall activity at the top-end of the market and unfairly targets homes in London and the south east of England.

How will the mansion tax work?

Under Treasury proposals, owners of homes in England worth £2 million or more will have to pay an extra High Value Council Tax Surcharge from April 2028.

This is on top of the council tax already paid by homeowners.

The money will be collected by local authorities and will be used to support funding for local government services.

A public consultation on details will be held in early 2026.

The Valuation Office will then conduct a targeted valuation exercise to identify properties worth above £2 million. Revaluations will be conducted every five years.

Eligible homes will then be placed in four price bands, from £2,500 for a property valued in the lowest £2 million to £2.5 million band to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year.

The government said it will setup a support scheme for those who may struggle to pay the charge and will consult on a full set of reliefs and exemptions, as well as proposed rules for more complex ownership structures including companies, funds, trusts and partnerships.

The consultation will also cover treatment of those who are required to live in a property as a condition of their job.

Who will be affected by the mansion tax?

The Treasury estimates that fewer than 1% of properties in England are expected to be above the £2 million threshold.

But that may not be much help for owners of high-value homes based mainly around the south of England and in London, which could have an impact on house prices.

Data from property website Rightmove shows sales agreed for £2 million-plus homes are already down 13% year-on-year.

Dominic Agace, chief executive of estate agency brand Winkworth, said: “In London, this is a terrace tax, not a mansion tax. Many £2m plus properties are likely to be terraced family homes.

“There is a danger that more uncertainty will be the result of this move, with delays on the revaluations inevitable. Many people living in London in £2m plus homes are those who are leveraged with large mortgages or those with their property as their only asset and living on a small retirement income.

"A double whammy of extra council taxes for second home owners, particularly in London, is another move by the Government that will keep international buyers away from the capital and for those already here to sell up. If the chancellor is looking for quick wins, then I am afraid this is not going to deliver.”

Colleen Babcock, Rightmove’s property expert said this tax would disproportionately affect London and the south of England markets, which are still recovering from April’s stamp duty increase.

She said: “The property market needs less taxation not more, to encourage and enable movement. Today’s announcement could lead to some distortion at the top end of the market, particularly as the implementation date draws closer. It may also have an impact across the rest of the market.”

What the mansion tax means for you

Homeowners of prime properties will need to await the outcome of valuations, which could freeze the top end of the market and even force some to sell to avoid the charge. The question is who would want to purchase a £2 million house.

Nick Leeming, chairman of estate agent Jackson-Stops, suggested we are likely to see values for homes just above the threshold adjust, impacting prime market demand, and making government valuations at those levels even harder if short-term fluctuations occur.

He added: “In the long-term, having a wider lens and a level head will be key to regaining pricing stability in the coming months.”

Even if some wealthier buyers are unfazed by an additional cost, Babcock warned that there could be fall-throughs as others in this price bracket reconsider the long-term implication of their purchase.

She said: “Sellers of homes priced very close to the £2 million mark may need to ask for £1.99 million to avoid putting off potential buyers. And retired homeowners who benefitted from house price inflation may face the difficult decision of whether they can afford the annual upkeep of a £2 million home.

“Importantly, while this likely very complex tax aims to target the £2 million and £5 million price sectors, there is an inevitable trickle-down effect for the rest of the market. Even though our data shows that less than 0.5% of sales would be directly affected, a slower market can affect all types of movers, from first-time buyers to key workers and families.”

Paula Higgins, chief executive of the HomeOwners Alliance, warned that a mass revaluation of bands F to H will inevitably trigger large numbers of appeals.

She said: “Without clear valuation rules, adequate resourcing, and a straightforward process people can trust, this risks becoming chaotic, slow, and deeply contentious.”

“Until the revaluations take place, Tom Bill, head of UK residential research at Knight Frank, said buyers and sellers face years of uncertainty, especially around the £2 million threshold.

He said: “Even once completed, new valuations can be challenged, which would prolong the limbo.

“The policy may also raise less than expected, especially because it is deferrable. If opposition parties say they would scrap it, many homeowners will look at the opinion polls and wait it out. When you factor in the cost of carrying out the valuation and the potential lost stamp duty revenue from a stickier market, the sums raised could look like a rounding error for the Treasury.”

Another key concern for homeowners is whether thresholds will be reviewed as house price rise.

Bill said: “More properties will inevitably get dragged into the mansion tax net, which means the proportion of terraced houses, flats and semi-detached homes will grow over the years, particularly in the capital. The term ‘mansion tax’ will increasingly feel like a misnomer.

Higgins added: “This mansion tax could quickly become relevant for more homeowners than the Chancellor anticipates.

“We expect these arbitrary thresholds of a mansion tax will distort the market, which Office for Budget Responsibility has recognised will cause bunching of sales just below the thresholds.

“We need to remember that people living in high-value homes aren’t always cash-rich. Many are stretched, still paying big mortgages, and have simply ridden a wave of rising prices. A mansion tax would freeze investment in homes over £1million overnight, as owners hold back on improvements to avoid being pushed over a threshold the government will almost certainly freeze.”