Nearly a year after the prospect of a mansion tax was formally confirmed in the budget, we look back to see how it's shaped the housing market over the last 12 months. While prime markets, particularly those in central London, were already facing headwinds, the introduction of the mansion tax appears to be adding to them.
1. The £2m threshold is distorting pricing and buyer behaviour
Evidence from agreed sales suggests the £2.0m threshold is increasingly acting as a psychological and financial barrier.
- The number of sales agreed between £2.0m and £2.2m is down 4% year-to-date (January-September) compared to the same period last year.
- In contrast, agreed sales within the 10% below the threshold (£1.8m to £1.99m) are up 19% year-to-date.
This suggests that would-be buyers of homes priced close to the £2.0m threshold are becoming increasingly sensitive to crossing the £2m boundary. Agents report that sellers are often finding it easier to launch homes and agree sales either comfortably below the threshold at around £2m, or significantly above it at around £2.5m, with homes priced in between proving much harder to sell.
2. Thousands of homeowners who have paid £2.0m+ may not be liable to pay the mansion tax
Our analysis indicates that house price movements have eroded the value of many homes that previously sold for more than £2m.
- We estimate that around 7% of homes sold for more than £2.0m last year are now estimated to be worth less than £2m today. In London, the figure rises to 10%.
- Given the weakness seen in prime London markets over recent years, particularly across central London boroughs, many homes that changed hands only slightly above £2m are likely to have fallen below the threshold.
This is likely to mean that 6,000-7,000 homes that changed hands for £2.0m+ over the last few years are likely to escape paying the mansion tax by virtue of falling house prices in these markets.
3. Sellers of £2m+ homes are accepting the biggest discounts in over a decade
The £2m-plus market has also underperformed the wider housing market when it comes to price negotiations.
Share of the initial asking price achieved
| All homes | £2m+ homes | |
|---|---|---|
| 2025 | 95.6% | 93.6% |
| 2026 YTD | 95.2% | 92.4% |
| YoY change | -0.5% | -1.2% |
Source: Connells Group data
The average £2m+ home sold for 92.4% of its original asking price this year, the lowest level since 2015 and a significantly steeper discount than across the wider market. While sellers across the market are having to be realistic on pricing, the discounting is notably larger for higher-value homes.
Summary
Taken together, the evidence suggests the £2.0m mansion tax threshold is having a growing influence on market behaviour. Buyers are increasingly clustering below the threshold, transactions just above it are becoming harder to achieve, and a significant number of properties that were previously worth more than £2.0m have fallen below that level as prime market values have softened.
At the same time, sellers of higher-value homes are having to accept the largest discounts seen in more than a decade, pointing to continued weakness in this part of the market. Homes here are often changing hands for prices which are less than the seller paid a decade ago, meaning that a new tax will be levied on what is currently a depreciating asset.
While the longer term impact of the tax is less certain, it looks increasingly likely to create a visible distortion in the market, one significatly larger than was created by the previous stamp duty slab system. It will create an ongoing, growing liability rather than a one-off stamp duty bill, something which is being factored in to sale prices.
