Levy to affect approximately 100,000 properties, predominantly in London and the south-east
The UK government will apply an annual surcharge on residential properties valued above £2 million, a measure expected to be announced in tomorrow's Budget could generate between £400 million and £450 million annually.
Chancellor Rachel Reeves initially contemplated a levy commencing at £1.5 million but narrowed the scope following opposition from Labour Members of Parliament representing affluent metropolitan constituencies. The policy will affect approximately 100,000 residences, predominantly situated in London and the south-east.
The surcharge will operate on a graduated basis, with liability determined by property values exceeding the £2 million mark. Annual payments are anticipated to average £4,000, though the exact amount will depend on individual valuations. The sum will accrue to the Treasury rather than local authorities.
To implement the scheme, the government will undertake the first comprehensive revaluation of properties in the uppermost three council tax bands since 1991. Given the administrative requirements, revenue generation is unlikely to commence before 2028.
Property owners may accumulate annual charges and settle them upon death or sale, rather than paying annually. Estate agent Savills estimates approximately 145,000 residences in Great Britain exceed the £2 million valuation threshold.
Homes worth more than £2mn set to be hit by Budget raid https://t.co/12jkLJaI3z
— Financial Times (@FT) November 24, 2025
Market conditions across price tiers reveal pronounced weakness at the upper end. Data from property platform Rightmove demonstrates that sales agreed for homes priced above £2 million have contracted 13% year-on-year, while the £500,000 to £2 million segment has experienced an 8% decline. Lower-priced properties, below £500,000, have proved more resilient, with transaction volumes declining only 4% annually. Ultra-premium properties represent less than 0.5% of all agreed sales, with roughly 1% of homes currently listed exceeding £2 million in asking price.
Prestigious London areas are experiencing heightened downward pressure, with the capital expected to bear the brunt of the so-called mansion tax. September figures revealed a 14% contraction in Westminster, a 15% decline in the City of London, and an 11.3% reduction in Kensington and Chelsea year-on-year. Across London overall, values declined 1.8% annually, contrasting with a 2.6% increase nationwide.
"Although a mansion tax would apply only to high-value homes, it could still discourage some owners from moving, which could slow wider market activity," said Tony Hall, head of business development at Saffron for Intermediaries.
"Movement at all levels is important to keep transactions flowing. At the same time, extra tax pressure on landlords could reduce rental supply when demand is already high. The Chancellor needs to strike a balance that supports both mobility and stability."
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