Mansion Tax increases predicted in upcoming Budget

The Mansion Tax is a prime target in the upcoming Budget, a leading estate agency warns.

Knight Frank suggests that the so-called Mansion Tax – otherwise known as the High Value Council Tax Surcharge announced in last autumn’s Budget – may prove to be only to be “introductory rates”.

The Mansion Tax is due to be introduced in April 2028, and applies to properties worth £2million or more in England.

The annual surcharge will range from £2,500 to £7,400 – depending on the value of the property – and will be charged in addition to a household’s regular Council Tax.

Budget choices

Knight Frank’s head of UK residential research Tom Bill, says Andy Burnham faces “tough choices’ in order to meet his Government’s spending plans.

He says: “There has been a flurry of announcements since Burnham entered 10 Downing Street on 20th July, including a £2 bus fare cap in England, a cut in business rates for pubs and clubs, abolishing VAT on electricity bills and overhauling the social care system.

“A so-called Smorgasbord of taxes on assets and wealth is likely to be Burnham’s preferred method of payment for his plans, which would mean the High Value Council Tax bands may prove to be merely introductory rates.”

If high-value property is targeted, it could put a dent the gradual recovery that has been taking place in the prime London market this year.”

He continues: “Given the bond market won’t permit a Government spending spree, Labour backbenchers won’t sanction meaningful spending cuts, and the Labour manifesto ruled out income tax, VAT or national insurance rises, the approach increasingly looks like the default option.

“If high-value property is targeted in the third successive Budget (following changes to the additional rate of stamp duty in 2024 and council tax bands in 2025), it could put a dent the gradual recovery that has been taking place in the prime London market this year.”

Landlords’ taxes

There may also be bad news for landlords in the Budget.

Bill explains: “In a summer when Budget speculation is less intense that last year, one possible change appears to be aligning rates of Capital Gains Tax and Income Tax.

“It would be bad news for some landlords, but tenants would also suffer if owners sold and upwards pressure on rents increased.

The Renters Rights Act, which was introduced in May, has already demonstrated the law of unintended consequences as some landlords have exited while others have set higher asking rents to offset the greater financial risks they face with the new legislation,

“If the Government wants a lever to pull that is guaranteed to stimulate the housing market, it should listen to industry calls for a Stamp Duty cut.”

Burham has, however, already insisted that he won’t be changing Stamp Duty.