The High Value Council Tax Surcharge – universally known as the mansion tax – was introduced in the November Budget.

The new levy will be introduced in two years’ time. Yet, as Hamptons data shows, it is already beginning to shape buyer and seller behaviour, placing downward pressure on the prices of properties around the bands of the new tax. House hunters bidding for properties priced around £2 million - the mansion tax starting point - are pitching their offers below this level, seemingly in the hope that these homes will remain outside the mansion tax net.

Here are the answers to the questions being asked about the mansion tax which aims, as the Chancellor put it in the Budget, to address “longstanding source of wealth inequality" within the council tax system.

HOW WILL THE TAX WORK?

The mansion tax will be an annual charge, on properties that were valued at £2 million or more in 2026. The amount of tax, which will be payable as a council tax surcharge from April 2028, will vary in line each year with both the Consumer Price Index (CPI) and the value of the home.

From April 2028, the surcharge will be £2,500 on homes between £2 million and £2.5 million, and £3,500 on those between £2.5 million and £3.5 million. The bill on homes between £3.5 million and £5 million will be £5,000, rising to £7,500 on properties £5 million.

HOW MANY PROPERTIES WILL BE SUBJECT TO THE TAX?

Towards the end of this year, the Valuation Office Agency (VOA), an agency of HMRC, will start to assess homes currently estimated to be worth £1.5 million or more. Our analysis indicates there are about 145,000 homes valued between £1.5 million and £2 million, with another 130,000 priced above £2 million. These numbers are likely to alter, however, as the market adjusts to the implication of the new tax.

HOW ARE BUYERS RESPONDING?

The coral line on our chart shows the share of offers below the £2 million level on homes with asking prices between £1.8 million and £2.2 million. Since the Budget, we have observed a significant increase in the number of such homes receiving offers below £2 million.


A year ago, 64% of properties on the market with an asking price within 10% of this level received offers below £2 million. Today, it is 83%, underlining the resolve of buyers to remain outside of the scope of the tax. We repeated the analysis for properties priced within 10% of £1 million. As the purple line on the chart reveals, buyer behaviour was unaffected by the Budget.

HOW ARE SELLERS RESPONDING

In the two months following the Budget, 5.6% more properties valued at between £1.8 million and £2 million were put up for sale than at the same time a year before. This could mean that sellers were keen to keep their homes below the taxable threshold to attract buyers. But, during the same period, 6.5% fewer homes priced between £2 million and £2.2 million were put up for sale.

A rise in such listings would have been expected if owners were primarily motived to offload homes that could be liable to the mansion tax. Rather, the decline suggests that some sellers are reducing prices to ensure their properties are below the threshold where current demand seems strongest.

"Prices are adjusting to just below the thresholds for the tax, as buyers attempt to ensure that they will not immediately be liable for the tax. "

Confirmation of this can be found in activity around the £5 million threshold. A 7% fall in the number of such homes coming to the market just above this level during the two months after the Budget coincided with a 35% jump in properties just below £5 million being put up for sale.

These trends indicate that the mansion tax is already causing a gentle downward adjustment in the asking prices of homes close to the thresholds, as sellers take into account the expectations of buyers. The mansion tax represents a fairly small, but extra financial commitment for prospective buyers. This is changing behaviour and creating a cliff edge.

Prices are adjusting to just below the thresholds for the tax, as buyers attempt to ensure that they will not immediately be liable for the tax. At least, that is, until their homes are reassessed under the annual revaluation process.