Chancellor Rachel Reeves has announced in the Budget a new ‘mansion tax’, placing a charge on high-value properties.
Under the plans, properties worth more than £2 million will have to pay an annual charge, which will be added to their existing council tax bill.
The surcharge will start at £2,500 for homes valued in the lowest £2-2.5 million bracket, rising to £7,500 for properties worth £5 million or more.
Simon Bashorun, head of advice at Rathbones Private Office, said: “The mansion tax is effectively a wealth tax, disproportionately impacting London and the South East where property values are typically higher. Yet it is only expected to raise £400-500 million, a drop in the ocean compared to the multi-billion pound fiscal gap, raising the question – is the juice worth the squeeze?”
Bashorun warned the policy is fraught with “practical challenges”. These include valuations being contested, and costly annual assessments for unique, high-value properties which will be prone to disputes.
“A surge in appeals could overwhelm government resources, making the system inefficient and expensive to administer.
“Economically, the tax risks creating price cliffs near the threshold, discouraging transactions and renovations. This could stifle housing development and even reduce property tax revenues – undermining the Government’s objectives,” he added.
Mark Campbell, head of wealth at Isio, warned that the proposal makes a “flawed assumption” that those living in homes worth over £2 million have the liquid income to pay such a tax.
He explains: “It risks penalising people who are “asset rich, cash poor,” particularly in regions like London and the Southeast, where high property values don’t necessarily reflect high incomes. Many will still have significant mortgages, especially as fixed-rate terms end and interest rates bite, while property values themselves could be negatively affected.
“It also fails to account for circumstance or tenure. Someone who bought their home decades ago and now lives on a pension could face punitive costs simply for staying put and, if forced to move, they would face further burdens through stamp duty and potential capital loss. The measure also raises questions of fairness between those who own a single property and others with multiple, smaller assets.”
Campbell said that at a broader level, the plans risk sending a message that the UK is a less attractive place for wealth creators, entrepreneurs and investors.
“We should be encouraging people to stay, invest, and contribute to a thriving economy, not pushing them away. People don’t stay for the weather; they stay for opportunity, stability, and a fair, predictable tax environment,” he added.
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