How the mansion tax might impact you even if the value of your house is less than P2 million

Beginning in April 2028, homes valued at more than £2 million will be subject to the mansion tax; however, MPs have been informed that even lower-value properties may be considered

Although owners of high-value properties valued at £2 million may already be aware of the impending mansion tax, there are cautions that homes below the threshold may be impacted.

Plans for a mansion tax were revealed by Chancellor Rachel Reeves in her Autumn Budget for 2025.

Owners of homes in England valued at £2 million or more will be required to pay an additional High Value Council Tax Surcharge starting in April 2028 under Treasury proposals that will be discussed this year.

The task of valuing homes will fall to the Valuation Office Agency (VOA), but this week the agency's head disclosed that even properties under the £2 million threshold could be hit.

The Scottish Government this week unveiled plans for its own version of the mansion tax, which will apply to homes worth more than £1 million, so homeowners with prime properties in Scotland will also be subject to the tax.

How much is the mansion tax?

Reeves has asserted that the fee will improve the fairness of the tax code.

"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 stated when introducing the tax during her budget speech. The "

Eligible homes will be divided into four price bands according to their house prices after they are valued. The bands, which are raised annually by CPI inflation, begin at 2,500 for a property valued in the lowest band of £2 million to £2.5 million and go up to 7,500 for a property valued in the highest band of £5 million or more.

Local authorities will gather the funds and use them to support funding for services provided by the local government.

In addition to consulting on a comprehensive list of exemptions and reliefs, the government stated that it will establish a support program for individuals who might find it difficult to pay the fee.

Who will be impacted by the mansion tax?

Less than 1% of English properties, according to Treasury estimates, are anticipated to be worth more than £2 million.

However, Jonathan Russell, the head of the VOA, disclosed to MPs this week that its valuation experts will "probably look at houses that have an indicative value of 1.5 million just to make sure we're not missing anything."

Family homes on the edge of the threshold have been warned that they might be hit as a result.

Oportfolio Mortgages' director of communications, Louis Mason, stated that high-value property owners are already feeling uneasy as a result of the VOA's remarks, especially those that are situated close to the suggested thresholds.

"Prime and super-prime markets are very sentiment-driven, and uncertainty about future tax liabilities tends to delay decisions," he stated. Some owners may decide to postpone purchasing, selling, or refinancing until they are certain of how and how frequently values will be determined.

"Those who are nearing the threshold are already acting with greater caution. While some homeowners might think about selling sooner rather than later to avoid future exposure, others might postpone significant improvements that might push them over a valuation line. The "

In addition, the Scottish Government has announced plans to implement a mansion tax in Scotland starting in April 2028. This tax will be collected through council tax and applied to properties valued at more than £1 million.

This is representative of a broader trend we are witnessing throughout the Western world, according to Marc Acheson, specialist at wealth management Utmost, where governments and policymakers are increasingly turning to the wealth community to close fiscal gaps.

"While this may seem like a politically lower-risk lever to pull, Scotland, like other nations, faces the reality that the wealth community is highly internationally mobile," he stated.

"The mere suggestion of such measures can cause behavioral reactions, hasten capital flight, and ultimately leave governments with a smaller tax base, even if they are never put into action. The "

The move has many other detractors.

Although some of the wealthiest homeowners in the UK may be targeted by the mansion tax, Jack Malnick, managing director of Sell House Fast, stated that there is a chance that families who bought modest homes decades ago will be unfairly impacted.

"These families and homeowners are victims of living in an area where the value of homes has risen at a rate that far exceeds the national average, leaving them in a precarious position," he stated. "They aren't living in sprawling, vast estates, nor are they necessarily cash rich."

"It seems unfair to penalize them with an extra fee, especially since many of them are retired or have fixed incomes. It is important for policymakers to acknowledge that a home's value may not always accurately reflect a homeowner's financial situation and make the necessary adjustments. A "

There will likely be many disagreements over valuations, particularly if they are within 100,000 of the threshold, according to Jonathan Turner, partner at the property law firm Morr & Co.

"This tax will trigger a surge in downsizing, which will saturate the market with valuable properties," he stated. This will therefore probably result in a general decline in values, which will lower the government's mansion tax revenue. The "