High-end London postcodes are losing their low-tax lure as council tax hikes stack on top of the mansion tax
Labour’s decision to let some of London’s wealthiest boroughs push council tax bills above the usual cap is set to add to the mounting cost pressures facing high-end homeowners – and could subtly reshape buyer behaviour in parts of the capital.
Under plans confirmed last week, Kensington and Chelsea, Westminster, Wandsworth, Hammersmith and Fulham, the City of London, and Windsor and Maidenhead will be allowed to raise council tax by more than 5% in both 2026 and 2027 without triggering the usual requirement for a local referendum. The move comes alongside a broader rebalancing of government funding towards more deprived areas, which is expected to leave many inner London authorities with a smaller share of central support and greater pressure to raise more revenue locally.
For years, some of these councils – particularly Wandsworth, Kensington & Chelsea and Westminster – have traded on reputations as low-tax enclaves, with Band D households often paying hundreds of pounds less per year than the English average. That gap has long been part of the appeal for affluent buyers weighing up different parts of London’s property map.
At the same time, there are early signs that the politics of council tax are becoming more contested. Wandsworth Council leader Simon Hogg has moved quickly to stress that, despite being granted extra flexibility, the borough has no intention of using it.
“Wandsworth Council sets the lowest Council Tax in the country,” he said, adding: “We don’t want the freedom to increase Council Tax beyond the 5% referendum limit and my administration won’t be using it. It’s the right thing to keep Council Tax as low as we can.” He also pointed to the borough’s “excellent services” and “some of the highest reserves and lowest debt of any London borough,” arguing this allows financial stability “without burdening residents.”
For buyers and sellers, that kind of reassurance underlines how fiercely some boroughs will fight to defend their low-tax reputations – even as others come under pressure to push bills higher.
READ MORE: Brokers sense ‘window of opportunity’ as mansion tax dust settles
According to Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, council tax has always been in the mix for wealthier buyers – even if it is rarely the first thing they talk about.
“Council tax has always been a factor in buyer decision-making at the top end of the market, even if it’s rarely the headline driver,” she says. “Having worked across borough boundaries, I’ve lost count of the number of conversations over the years with buyers who were very open about preferring Wandsworth or Putney over East Sheen or Kew, simply because the council tax was materially cheaper. That perception has been embedded for a long time.”
The latest changes come on top of the newly introduced “mansion tax” and higher borrowing costs, creating what many in the industry see as a cumulative squeeze on more expensive homes. While a single percentage rise in council tax might once have been shrugged off by wealthier households, the political and economic backdrop means buyers are now looking harder at the total cost of ownership – mortgage, stamp duty, mansion tax and running costs combined.
Reynolds suggests that narrowing the traditional council tax gap between low-tax boroughs and their neighbours could begin to shift some of those established calculations.
“If traditionally low-tax boroughs such as Wandsworth, Kensington & Chelsea or Westminster begin to narrow that gap, it does change the equation,” she says. “For higher-value homes already absorbing increased mortgage costs and the new mansion tax, council tax rises become part of a cumulative cost pressure rather than a marginal one. We’re already seeing some buyers scrutinising running costs much more closely than they did a few years ago.”
Even so, she does not foresee an overnight flight from historically popular postcodes. Instead, the impact is likely to be more nuanced – affecting negotiations, buyer expectations and the relative pull of neighbouring areas over time.
“In practical terms, we don’t expect this to trigger an immediate exodus, but it could influence behaviour at the margins,” Reynolds adds.
That “marginal” shift could still have meaningful consequences in a market where sentiment is fragile and price growth has already cooled at the top end. If London’s traditionally low-tax boroughs lose some of their fiscal edge, buyers comparing, say, Wandsworth with parts of Richmond, or Kensington & Chelsea with adjacent areas, may feel more freedom to prioritise space, schools or transport links over the historic council tax advantage.
For now, the bigger political battle will play out between ministers arguing the changes make the system fairer and critics warning of steep hikes in some of the country’s most high-profile boroughs. But for London’s estate agents and their clients, the question is how much extra cost will buyers tolerate – and at what point do council tax, mansion tax and higher mortgages together start to alter where, and what, they are willing to buy?
READ MORE: Why the mansion tax could freeze the prime market
