The Treasury faces upfront costs of at least £380 million before Labour’s high-value property levy begins generating revenue in 2028, according to government analysis.
The council tax surcharge on properties worth more than £2 million, announced by Chancellor Rachel Reeves in the Autumn Budget last November, is expected to reduce stamp duty and inheritance tax receipts by £230 million over the next three years. An additional £150 million will be required to identify and value affected properties, The Times reported, citing Treasury estimates.
Levy structure and revenue projections
The surcharge will apply from April 2028 to residential properties in England valued above £2 million, payable in addition to standard council tax. The levy operates across four bands: properties between £2 million and £2.5 million will incur an annual charge of £2,500, rising to £3,500 for homes worth up to £3.5 million. Properties valued between £3.5 million and £5 million will face a £5,000 annual charge, while those above £5 million will be subject to a £7,500 levy.
Treasury projections suggest the measure could generate approximately £1.4 billion in its first three years, with a net return of £930 million by 2031 after accounting for costs and reduced receipts elsewhere. The policy is expected to affect around 156,000 homeowners, with typical annual charges of about £3,000.
Market impact ahead of implementation
The proposed changes are already influencing activity at the top end of the property market, according to industry data. Aneisha Beveridge, head of research at Hamptons, said: “Our analysis suggests the mansion tax is already shaping behaviour for both buyers and sellers, particularly around the £2 million entry point.”
Listings between £1.8 million and £2 million have risen 6% since the Budget, while properties marketed between £2 million and £2.2 million have fallen by 7% over the same period. Buyers are reportedly structuring offers to keep prices below the £2 million threshold.
The market adjustments come as UK mortgage affordability reaches its lowest level since 2008, adding further pressure to high-value property transactions. The changes also follow the introduction of new rental market regulations backed by £41 million in enforcement funding.
Beveridge noted concerns about future threshold adjustments: “When governments bring in thresholds like this, generally they tend to come down. So we could see future governments tweak the £2 million level just to pull in more tax.”
Officials estimate that stamp duty and inheritance tax receipts could fall by £230 million over the next three years, partly reflecting downward pressure on prices around the £2 million threshold.
Government position
The Treasury said the measure is intended to generate revenue for public services while addressing disparities within the current council tax system. The net fiscal impact before revenue generation reflects both reduced receipts from existing property taxes and administrative costs associated with implementing the new levy.
