England mansion tax base shrinks as falling home values cut potential receipts

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England mansion tax base shrinks

Highlights

Automated valuation data from Hamptons show 8,800 fewer English homes valued above £2 million since the high-value council tax surcharge was announced, shrinking the tax base.
The Office for Budget Responsibility projects the surcharge will raise £400 million in its first year (2028–29), with 165,000 homes liable initially—falling to 156,000 after considering homeowner appeals.
The surcharge, starting at £2,500 per year for £2 million-plus homes in April 2028, faces risks from valuation appeals and behavioural changes, likely reducing receipts by £28–50 million annually compared to prior estimates.

Property valuations and tax base outlook

As reported by Hamptons, automated valuation analysis indicates there are 8,800 fewer homes in England worth more than £2 million than when the high-value council tax surcharge was announced in the autumn Budget. This year, the number of homes above that threshold has been falling by about 1,000 to 1,500 a month.

The surcharge is due to come into force in April 2028, starting at £2,500 a year for homes valued above £2 million, with higher charges applying above £2.5 million, £3.5 million and £5 million. Aneisha Beveridge, research director at Hamptons, says the decline is likely to mean the tax raises around £28 million less per year than it would have done in November 2025, or about £50 million less than if it had been introduced in 2022.

The number of homes above the £2 million mark peaks in 2022 and has since fallen as prices decline first in prime central London and later across the capital and southern England. Hamptons says that leaves 17,420 fewer £2 million-plus homes nationally, while some owners also seek to agree sale prices below the threshold to avoid the charge.

The Office for Budget Responsibility forecasts the tax raises £400 million in its first year and then increases in later years. It estimates that 165,000 homes would be liable in 2028-29 on the raw tax base, falling to 156,000 after taking account of homeowner behaviour, including valuation appeals.

Appeals risk and policy design

The Valuation Office plans to assess homes using an automated valuation model backed by professional judgment, following a method similar to council tax banding through comparisons with similar property sales and adjustments for differences. The government launches a consultation on the surcharge last month and says a draft list of liable properties will be published in late 2027, with homeowners given eight months to challenge their banding before final bills are issued.

Jonathan Hopper, chief executive at Garrington Property Finders, says the emotional nature of high-value home assessments is likely to generate a disproportionate number of appeals from owners close to the threshold. He also says desktop valuation is more difficult in the £2 million-plus market because properties are more individual than flats or terraced houses with similar layouts and size.

The government is also considering an extra premium for non-UK resident owners of homes subject to the tax, arguing that this could help ease pressure in areas such as London. It is separately proposing to let some low-income owners defer payment until the property is sold, with the consultation suggesting eligibility for households earning less than £35,000 a year and holding savings below £16,000; the consultation ends on July 14.

The Treasury says the tax is expected to raise around £430 million a year to support public services and to address what it describes as an unfair gap in council tax burdens between lower-value homes and multimillion-pound properties.

Our earlier article on the UK’s rising tax burden explained why projections for taxation to reach a postwar high are intensifying pressure on future governments to find new revenue. It noted that with easier, narrowly targeted options increasingly exhausted, policymakers may be pushed toward broader tax changes—while still facing behavioural risks such as appeals, avoidance, or taxpayers changing how and where they pay.

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