But four in 10 appeals against the measure will be successful
The British government’s so-called “mansion tax” is expected to impact about 165,000 homeowners when it comes into effect in 2028 – but nearly half of appeals against the measure will be successful, according to the Office for Budget Responsibility (OBR).
The rule, introduced by Rachel Reeves in last year’s autumn budget, will see owners of homes valued at over £2 million pay an additional “high-value council tax surcharge” in specific price bands depending on value.
The measure will come into effect in April 2028 and is forecast to take in £400 million in taxes in its first year, rising to £435 million in 2030-31. Properties valued between £2 million and £2.5 million will face an extra £2,500 tax, while those valued at £5 million will be taxed at an additional £7,500.
The OBR report said about 71,000 homes will be affected by the first band, 79,000 by the middle tier, and 15,000 by the highest band – with London and the South East bearing the brunt of the tax.
Twenty percent (20%) of homeowners will likely appeal the tax, according to the OBR, with a success rate “provisionally assumed” to be 40%, reflecting the higher-value properties involved and the relatively narrow bands.
And a potential flurry of sales as homeowners opt to avoid the tax could mean nearly 10,000 fewer eligible properties by 2028-29, the report said.
In February, Hamptons research showed that the two months after the measure was announced saw a 5.6% jump in the number of homes listed for between £1.8 million and £2 million, potentially an effort to help buyers avoid the tax, as new listings between £2 million and £2.2 million dipped by 6.5%.
The OBR’s new report flagged a potential reduction in the delivery of “high-value new builds” because builders would fear those properties not selling due to the mansion tax.
Mortgage industry members have also criticized the plan. Michelle Niziol, founder of IMS Property Group, told Mortgage Introducer in January that it would impact a wider swathe of homeowners than policymakers intended.
“This won’t just hit the wealthy elite,” she said. “It’ll catch people who bought modest homes years ago in strong areas, stayed put, and watched the value rise.”
Shadow housing secretary Sir James Cleverly said households were being “punished” by the measure. But Labour and Treasury spokespeople have defended the change, with a Treasury representative describing the move in December as “reforming property taxes so a £10 million Westminster mansion doesn’t pay less than a typical family home in England.”
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