Mansion Tax Proposal Sparks Backlash in the Capital
Reports that Chancellor Rachel Reeves is considering a new 1% annual mansion tax on homes worth over £2 million have triggered strong criticism from the London property industry. Experts warn the measure would disproportionately target homeowners in London and the South East, where around 80% of affected properties are located.
Under the proposal, a £2.5 million property could face an additional £5,000 annual bill, while a £3 million home would owe roughly £10,000. Agents describe the plan as a “London levy” that risks penalising families and pensioners already struggling with high living and housing costs.
London Market ‘Patchy and Vulnerable’
Lucian Cook, director of residential research at Savills, warned that London’s housing market remains fragile after a decade of tax changes. He noted that 62% of all £2m+ homes are in London and another 18% in the South East, meaning the burden would fall heavily on these regions.
Cook added that the proposed levy would be difficult to administer fairly because of the nuanced nature of property valuations. Factors such as renovations, finish quality, and mortgage debt make assessing wealth far more complex than headline values suggest.
Homeowners and Pensioners Could Suffer Most
Analysts say the proposed mansion tax could have devastating effects on pensioners and middle-income families living in long-owned homes that have appreciated in value. Many of these homeowners are “asset-rich but cash-poor” and may struggle to pay an annual wealth-based charge.
Critics argue that one person’s “mansion” in London could be equivalent to an average family home elsewhere in the UK. The policy, they warn, would be costly to administer, difficult to value fairly, and risks pushing more homeowners into financial distress.
Labour Under Pressure to Target the Wealthy
Rachel Reeves faces intense pressure to raise around £30 billion in her upcoming November 26 Budget to meet Labour’s fiscal rules. She has repeatedly stated that those with the “broadest shoulders” should contribute more through taxes a signal that London’s wealthiest homeowners may soon face higher bills.
The Treasury is reportedly exploring several wealth-based tax options, including higher stamp duty rates and changes to property valuation rules. However, economists warn such measures could deter investment and undermine confidence in the housing market.
Property Experts Warn of Market Fallout
London’s property sector already contributes over 40% of residential stamp duty revenues, rising to more than 60% when including the South East. Industry figures say an annual mansion tax could stall sales, depress prices, and further damage market sentiment.
Becky Fatemi of Sotheby’s International Realty UK said: “Homeowners have already paid huge amounts in stamp duty and council tax. Asking them to pay again each year for owning their homes would punish the very people keeping the market moving.”
Calls for ‘Long-Term Thinking’ on Property Tax Reform
Jeremy Gee of Beauchamp Estates criticised the lack of consultation on the mansion tax, saying it risks “unsettling homeowners and investors” already facing high mortgage rates and slow sales. He urged the government to focus on stability rather than reactionary measures.
Mark Pollack of Aston Chase added that delaying the Budget has already reduced transaction volumes in prime central London by 20%. A further tax on wealth, he warned, could trigger a sharp realignment of property values and damage the wider economy.
