More details have started to emerge on the potential impact of the ‘mansion tax’ outlined in the last Budget.
Rachel Reeves’ first two Budgets have largely focused on tax increases that take effect later. For instance, the widely debated changes to inheritance tax (IHT) reliefs for businesses and agricultural assets were announced in October 2024 but have only recently come into force. Likewise, plans to bring pensions within the scope of IHT were introduced at the same time, but won’t take effect until 6 April 2027.
In the Autumn 2025 Budget, proposals were unveiled for a High Value Council Tax Surcharge (HVCTS), often referred to as a ‘mansion tax’, targeting properties valued at £2 million or more from April 2028. At the time, limited detail was provided, with a consultation expected in the New Year. As yet, the Treasury has not published further information. However, shortly before Easter, the Office for Budget Responsibility (OBR) shared its initial assessment of the measure’s potential effects, revealing several notable points:
- Impact on property values:
The OBR expects the future cost of HVCTS to be reflected in property prices by 2028. While no explicit figures were published, their analysis suggests that for every £1,000 of annual CPI-linked charge, a property’s value could fall by around £35,000. For example, properties in the lowest band (£2m–£2.5m), facing a £2,500 charge, could see values reduce by approximately £87,500. - Price clustering near thresholds:
The OBR anticipates that property prices may cluster just below each tax threshold, pushing down values of homes that would otherwise sit slightly above these levels. This mirrors behaviour seen under the previous stamp duty structure where sharp thresholds influenced pricing.
| Property value in 2026 | HVCTS in 2028/29 |
|---|---|
| £2m to £2.5m | £2,500 |
| £2.5m to £3.5m | £3,500 |
| £3.5m to £5m | £5,000 |
| £5m + | £7,500 |
Around 20% of liable property owners (not occupiers) are expected to appeal valuations, with an estimated 40% success rate.
One of the most striking observations is the relatively modest revenue forecast: the tax is expected to raise around £400 million in 2028/29. In Treasury terms, this is a relatively small sum, roughly equivalent to increasing the standard VAT rate from 20% to just 20.04%, though clearly a much more politically sensitive move.
As with all forecasts, it remains to be seen whether the OBR’s expectations will materialise.
Tax treatment depends on individual circumstances and may change in future. The Financial Conduct Authority does not regulate tax advice.
15th May 2026
