What could a Mansion Tax mean for homeowners?

With the impending Autumn Budget 2025 around the corner, Price Bailey’s team of experts have been keeping a close eye on the key speculations. In our most recent Quick Reads, Jon Chambers, a Tax Director at Price Bailey, discusses the impact that the speculated Mansion Tax would have on the market and homeowners.

We’ve been hearing speculation of a Mansion Tax being implemented in the upcoming Budget. Please can you share your thoughts on this?

Whilst there is a lot of speculation around this, it is already impacting the market. We’re seeing increased sales of higher-value properties, with the main proposal being an annual tax on properties worth more than £2 million. For example, as we understand it, if a property is worth £3 million, the charge would be 1% of the excess – that’s a £10,000 levy.

Alternatively, there’s growing speculation that the tax would only be paid on the sale of a property, which would help alleviate the burden for individuals who are asset-rich but cash-poor. My personal view is that such an approach is unlikely to raise significant funds for the Government, so an annual charge is probably more likely, if the proposal were to go ahead in the first place.

It’s been reported this could affect around 150,000 homeowners. What would a Mansion Tax mean for them?

If the tax is introduced, one of the main issues would be how it affects the property market, particularly in terms of pricing. There’s likely to be a ‘cliff-edge’ effect, which could lead to downward pressure on properties worth just over £2 million, similar to what we saw under the old slab system for Stamp Duty Land Tax (SDLT) a few years ago.

Another issue is who would actually collect the tax if it’s introduced. Would it be HMRC? Would it fall to local councils? For those who are asset-rich but cash-poor, this could create real challenges. That group of taxpayers is likely to be one the Government focuses on when trying to raise additional revenue.