London Property Market Faces New 'Mansion Tax' Challenge
Chancellor Rachel Reeves has unveiled what industry experts are calling an "assault" on London's property market, introducing a new high-value council tax surcharge that will disproportionately affect homeowners in the capital. The policy, announced in Wednesday's Autumn Budget, will target properties valued at over £2 million from April 2028.
Staggered Charges for High-Value Properties
The new mansion tax will operate through four price bands, with annual charges ranging from £2,500 to £7,500 added to existing council tax payments. Properties valued between £2 million and £2.5 million will face the minimum £2,500 charge, while homes worth more than £5 million will be hit with the maximum £7,500 annual surcharge.
According to Treasury estimates, the measure is projected to raise £0.4 billion in the 2029-30 financial year, with all revenue flowing directly to central government rather than remaining with local authorities. This has raised concerns about whether London will see any benefit from taxes predominantly collected within its boundaries.
London Homeowners Bear the Brunt
Industry data reveals the extent of London's exposure to the new tax. Of the 1,434 homes sold above £2 million across England and Wales this year, a staggering 66% (940 properties) were located in London. These transactions represent 2.3% of all homes sold in the capital this year, compared to just 0.4% nationally.
James Evans, CEO of leading London real estate agency Douglas and Gordon, didn't mince words in his assessment. "This Autumn Budget is nothing short of an assault on London's property market," he stated. "While the devil will be in the detail of the valuation process itself, it will hit ordinary home-owning Londoners and those in the South-East of England hard. I see this as a tax on ordinary success."
Property Industry Voices Concerns
Jo Eccles, founder and managing director of prime central London buying agency Eccord, highlighted the impact on middle-class homeowners. She noted that the policy will "directly impact London's upper-middle classes... their outgoings can only stretch so far."
Tom Bill, head of UK residential research at Knight Frank, expressed concerns about the broader market implications. "The new policy throws a spanner into the works of the housing market for not much in return," he commented. "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."
Bill warned that the mansion tax could "freeze investment in homes over £1m overnight, as owners hold back on improvements to avoid being pushed over a threshold the government will almost certainly freeze."
Structural Reform Opportunity Missed
Madeline Gowett, tax partner at law firm Travers Smith, offered a nuanced perspective on the policy. While acknowledging that the mansion tax may "tick the fairness box by supposedly targeting those with broadest shoulders," she described it as "far from perfect."
Gowett emphasised that "without structural reform this Budget misses the chance to modernise a property tax system that is outdated, deficient, and overly complicated." This sentiment reflects broader concerns within the property industry that the government has opted for a quick revenue-raising measure rather than addressing fundamental issues with the UK's property taxation system.
The announcement comes during a year when the property market has already shown signs of stalling amid uncertainty about potential tax changes. While the mansion tax won't have the same impact as a comprehensive annual property value tax or sales tax, it represents another challenge for London's already pressured housing market.
