Mansion tax explained: what does it mean for you?

What is the mansion tax?

The mansion tax is a new annual council tax surcharge for homes worth £2 million or more, announced in the 2025 Autumn Budget and coming into force in April 2028.

It will only apply to homes in England, and the vast majority of homeowners and new home purchases won’t be impacted by the new mansion tax.

There will be four value bands for the mansion tax surcharge:

• The lowest band will be £2500 per year, paid on properties worth between £2 million and £2.5 million.
• The highest band will be £7500 a year, paid on homes worth £5 million or more.

Exact details on the different bands are not yet known.

Click to jump to:

• How will houses be valued for mansion tax?
• When will the mansion tax apply?
• How does mansion tax work and what does it mean for me?
• Mansion tax bands
• Mansion tax exemptions
• How many houses in the UK are worth more than £2 million?
• Is mansion tax annual?

How will property values be calculated?

Reportedly, the property values that determine who will pay the mansion tax will be calculated by the Valuation Office Agency, using the property’s value in 2026.

When will the mansion tax apply?

The mansion tax will be payable from April 2028, so there is still over two years until homeonwers and home buyers will need to consider it if they own or are purcahsing a high-value home.

Where will the money raised from the mansion tax go?

Currently, council tax is paid to the local authority for your area. This new surcharge will instead be paid to the Treasury (central government) where it can be used for government spending.

Is mansion tax paid in addition to council tax?

Yes, this is an additional tax that must be paid on top of existing council tax rates.

Is mansion tax annual?

Yes, the mansion tax is an annual tax that will need to be paid on a yearly basis by homeowners. It’s not yet clear if it will be paid in a lump sum, or if payments will be made monthly.

Is mansion tax the same as stamp duty?

No, mansion tax differs from stamp duty. It was widely speculated that stamp duty reforms may have been announced in the 2025 Autumn Budget, but this wasn’t the case.

Stamp duty is a lump sum paid at the time of purchase at a rate that depends on the value of the property.

Mansion tax is paid yearly in addition to stamp duty, only on homes worth more than £2 million.

Will mansion tax rise in line with inflation?

Yes, it’s been suggested the tax will rise each year in line with CPI inflation after the 2029-30 tax year.

What are the mansion tax bands?

The full details on the mansion tax bands are yet to be released. So far, we know that there will be four different bands of tax, starting at £2500 per year for properties worht between £2 million and £2.5 million and rising to £7500 per year for properties worth £5 million or more.

Who will be affected by mansion tax? How many houses in the UK are worth more than £2 million?

Mansion tax will only impact properties at the very top end of the market. Reportedly, fewer than 1% of homes in England are worth £2 million or more. Most of these are located in London and the South East.

How does the new mansion tax work and what does it mean for me?

I’m buying or own a property worth less than £2 million

If you’re buying or already own a property that is worth less than £2 million in 2028 (based on 2026 prices), you will not be impacted by mansion tax and there is no additional tax to pay.

I’m buying or own a property worth £2 million or more

If you’re buying or already own a home worth £2 million or more, you will likely be impacted by mansion tax when it comes into force in April 2028.

You will be required to pay an additional annual tax. The amount you pay will depend on the value of your property, but it starts at £2500 per year, with four bands rising to £7500 per year for the highest-value homes.

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I rent a property worth £2 million or more

It’s been stated that the mansion tax will be levied on owners, not occupiers. So, in theory, tenants will not be responsible for paying it. However, in practice, rents may be raised to account for the additional tax owners have to pay, though any rent raises must be in line with renters’ rights reforms. This situation is not yet certain.

Will there be any exceptions to mansion tax?

Currently, it does not look like there will be any complete exceptions to mansion tax. Every property worth £2 million will be subject to paying it.

However, it’s been reported that there may be an option for homeowners to defer the payment until they sell the home or die, offering another option for those who own a high-value home but may not have the income to pay the yearly tax.

As it does not come into force until 2028, the finer details are yet to be announced.

What could happen to the property market thanks to the mansion tax?

Implementation of the tax is still several years away, but it could start having an impact on the property market sooner. The introduction of the tax could have several potential effects on the market, especially at the higher end. For example:

Price pressure near the £2 million threshold

Homes just above the threshold may see downward price pressure, as buyers and sellers try to avoid the surcharge. This could lead to price bunching, where properties worth just below £2 million become far more desirable than those worth just above.

However, it’s not yet clear how the valuations will work, and if a lower sale price will have any impact on whether the tax is payable if the official valuation puts the property at £2 million+.

Geographical shift in demand

Most homes worth £2 million or more in England are located in London and the South East. The mansion tax could lead to a growth in demand in slightly cheaper areas, as homebuyers seek homes that are valued below the threshold.

Prime markets may see price adjustments, where prices for high-value homes in become less inflated relative to regional properties.

Impact on new development

Developers targeting the high-end market may adjust project pricing or reconsider the size and value of the homes they’re building if demand for properties worth more than £2 million cools.

In particular, overseas investors might begin to rethink their property purchases in England if the annual surcharge adds to their holding costs.

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What do we still not know about the mansion tax?

The mansion tax has only just been announced, so there is still plenty that we don’t know about the specifics of the tax and how it will be handled. For example:

How valuations will be carried out

Such as what data or methodology will be used or how frequently they will be re-valued.

How ‘asset-rich but cash-poor’ cases will be handled

It’s been suggested that those who own a £2 million+ property but are relatively cash poor may be able to defer payment until sale or death, but it’s not yet clear how it will work.

If there will be any exemptions, reliefs or appeals

Beyond the option for deferral that’s been indicated by the government, it’s not yet clear if any other exemptions or reliefs will be available, or how disputes or appeals against valuations will be handled.

How the surcharge will interact with current council tax bands

Current council tax bands are based on property values from 1991. If the mansion tax is based on valuations from 2026, it’s not clear how these two valuations will interact and whether homes will also be revalued for council tax purposes.

Exactly how many homes will be impacted

The government has stated that fewer than 1% of homes will be impacted. However, estimates on how many homes are worth £2 million or more vary, so there is still uncertainty in this area.

How the transition will be managed

The tax won’t kick in until April 2028, but it’s not yet clear how this transition will be managed. For example, how owners will be notified, what information will be required, and how valuation calculations and the changes themselves will be communicated.

In summary, the 2025 Autumn Budget delivered far fewer surprises for homeowners and buyers than many expected. While the new mansion tax introduces an annual surcharge for properties valued at £2 million or more, this measure affects only a small fraction of homes and won’t take effect until 2028. Most of the other heavily rumoured changes, including stamp duty reforms and inheritance tax gifting caps, didn’t materialise. However, those owning, buying or selling high-value homes in the next few years should be aware of what’s coming and what the mansion tax means for them.

If you’re planning on buying or selling a high-value property, you want the UK’s number one conveyancer for properties worth £2 million+ by your side. Get in touch with us today to see how we can help.