The Rachel Reeves mansion tax dropped in her Budget last week, and it’s caused proper chaos. From April 2028, anyone with a property worth over £2 million pays an extra annual charge on top of council tax.
Starts at £2,500 and goes up to £7,500 for homes over £5 million. Four bands total. The Valuation Office will assess properties based on 2026 values, which means everyone’s about to find out what their home’s really worth.
The Treasury reckons this’ll raise £400 million by 2029 to 2030. Not massive money in government terms, but enough to make headlines. About 150,000 homes are likely to get hit, mostly in London and the South East. Cornwall alone has 212 properties that’ll face the charge. Rock’s apparently the poshest bit there, full of million-pound second homes.
Who Actually Pays This Thing
Look, if your house is worth under £2 million, you’re fine. That’s most people. The average UK house price sits below £300,000. Even in London, only a small fraction hits that threshold. But if you’re in that bracket, here’s what you’re looking at.
- £2 million to £2.5 million? £2,500 extra per year.
- £2.5 million to £3.5 million? £3,500.
- £3.5 million to £5 million? £5,000.
- Over £5 million? £7,500.
This is on top of whatever council tax you already pay. So band H properties in Westminster that already pay about £4,000 in council tax will now pay closer to £7,000 to £12,000, depending on their value.
The charge goes straight to the central government, not the local councils. Councils will collect it and get “fully compensated” for the admin, whatever that means. Local authorities don’t see a penny of the actual revenue.
Mansion tax UK isn’t Even New
This idea’s been floating around for decades. The Lib Dems pushed for it years ago. Labour talked about it. Tories rejected it repeatedly. Now it’s actually happening under a Labour Chancellor who needs to plug that £22 billion black hole she keeps going on about.
The Government broke its manifesto pledge not to raise income tax, National Insurance, or VAT. So they’ve gone after property instead. Property owners can’t exactly move their house to avoid the tax. They’re stuck. This makes them an easy target politically.
The timing’s mental though. The housing market’s already struggling. Mortgage rates are high. Sales are down. Confidence is shot. Slapping an extra tax on top is hardly going to help. Estate agents reckon it’ll make buyers nervous about getting close to that £2 million threshold. Why buy a £1.9 million house when next year’s valuation might tip you over?
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Will Labour Introduce a Mansion Tax? Always Had One Answer
Yeah, they were always going to. Starmer said before the election that “those with the broadest shoulders” need to carry the burden. Translation: rich people should pay more. Polling shows 44% of Brits support a wealth tax. Makes sense politically even if it’s terrible policy.
The mansion tax UK calculator doesn’t exist yet because the Valuation Office hasn’t done the 2026 assessments. But you can guess. If your house is worth £2.3 million now, you’re probably in the first band. £3 million? Second band. £4.5 million? Third. Over £5 million? Top band at £7,500.
How likely is a mansion tax to actually raise what the Treasury claims? Honestly, probably less than they think. People will fight valuations. Some will sell before 2028. Foreign buyers might avoid the UK entirely.
Property values in those bands could drop because of the tax itself, which means less revenue. It’s happened everywhere else that’s tried this.
The Royal Family Gets Stung Too
Buckingham Palace. Windsor Castle. Sandringham. Bagshot Park where Prince Edward lives. All worth way more than £5 million. All are technically liable for the top rate of £7,500 annually. Forest Lodge in Berkshire, where the Prince and Princess of Wales live with their kids, is valued at £16 million. That’s a £7,500 bill right there.
The Royal Family isn’t exempt. They’ll have to pay like everyone else. Well, assuming private residences count. The rules aren’t totally clear yet on what qualifies. Working royal properties might get excluded. Nobody knows for sure.
Prince Edward is taking heat because he pays basically token rent on Bagshot Park after a £5 million advance payment back in 2007. Now he might face a £7,500 annual surcharge on top of that. People are calling it obscene that taxpayers subsidise him, and now he has to actually pay tax on it.
Council Houses Over £2 Million Get a Pass
This is where it gets properly mental. Treasury documents released yesterday confirmed that social housing is exempt from the Rachel Reeves mansion tax. So if you’re a council tenant in a £2 million property, you pay nothing extra. If you own a £2 million property, you pay £2,500 minimum.
The Telegraph found at least 110 council houses worth over £2 million. Most are in central London. Westminster, Kensington and Chelsea, Camden. Properties that would sell for millions on the open market but are rented to council tenants at social rates.
Tories are going mental about this. James Cleverly called it “an attack on aspiration.” He said people who worked hard and saved hard now have to pay extra, while people in expensive properties “on the taxpayer’s dime” dodge the charge. He’s got a point, even if the delivery’s a bit much.
Practically, though, how do you tax council tenants who don’t own the property? You can’t. The council owns it. So, exempting social housing makes sense administratively even if it looks terrible politically.
Asset Rich, Cash Poor Problem
This is the bit nobody talks about. Plenty of people own expensive homes but don’t have much actual money. An elderly couple bought a house in Kensington in 1970 for £30,000. Now it’s worth £3 million. They’re both on a state pension. Where exactly do they find £3,500 extra per year?
The Government says people can defer payment until they sell or die. So it becomes a charge on the estate. That helps, but it’s still accumulating debt against your home. If you live another 20 years, that’s £70,000 owed. With interest, probably more.
Forcing older people to rack up debt against their homes just to keep living in them feels grim. They didn’t choose for property prices to explode. They just bought a house decades ago and stayed put. Now they’re “wealthy” on paper but actually skint in reality.
New tax on houses over 500k isn’t Happening Yet
That rumour did the rounds before the Budget. Some people thought the threshold might be £500,000, which would’ve hit millions of homes. It would’ve been political suicide. The average London house price is about £540,000. Setting the threshold there would’ve clobbered middle-class homeowners across the capital.
Reeves went with £2 million instead, which limits it to genuinely expensive properties. Still affects about 150,000 homes nationally. Still controversial. But at least it’s not hitting everyone who owns a three-bed semi in Wandsworth.
The fear now is that £2 million today becomes £1.5 million tomorrow. Then £1 million. Then £500,000. Once you create the mechanism, lowering the threshold is easy. That’s why people outside London are nervous, even though they’re nowhere near the current limit.
What This Actually Means
If you own a home worth under £2 million, this doesn’t affect you. Yet. If you own something over that threshold, you’ve got until April 2028 to figure out what to do. Sell before the valuation? Challenge the Valuation Office assessment? Just pay it and move on?
For the housing market, it’s another headache. Buyers already face high mortgage rates, stamp duty, and now potentially this surcharge if they’re looking at expensive properties. Sellers of homes near that threshold will struggle. Who wants to buy a £1.95 million house knowing next year’s valuation might push it into the taxable bracket?
Rachel Reeves mansion tax is happening whether people like it or not. It’s in the Budget. It’ll pass Parliament because Labour has the numbers. Come April 2028, homeowners with properties over £2 million will be writing cheques to HMRC. Some will be fine with it. Others will be fuming. And everyone else will be watching nervously, wondering if they’re next.
