UK Budget 2025: The 'Mansion Tax' That Wasn't - Why Now Is The Time To Buy London Property

With the UK Budget 2025 announcements now out of the way, there was at least a little silver lining on what was otherwise a very grey cloud for the UK economy.

For months, brokers, buyers, sellers and investors in the UK real estate market have been holding their breaths for what had promised to be a devastating tax on high value property owners in the form of a ‘Mansion Tax’.

As every other possible tax was mentioned, the moment came to property….and then?

Well, not quite what we were expecting.

It had long been speculated that Rachel Reeves (the UK Chancellor of the Exchequer) was going to hammer property assets at every level with raises in Stamp Duty and additional measures.

In the end, the following was announced and much to everyone’s surprise, there would be no changes to Stamp Duty or Capital Gains Tax (CGT) on property sales/ disposals.

Instead, a new “High Value Council Tax Surcharge” (“mansion tax”) for high-value residential properties: from April 2028, on homes in England valued at £2 million or more, that will pay an extra annual levy on top of council tax. 

This surcharge will be banded by value: starting at £2,500 per annum for £2,000,000–£2,500,000 homes; rising up to £7,500 per annum for homes worth over £5,000,000. The additional tax will apply to owners (not occupiers) and is expected to affect

“less than the top 1% of properties in the UK”

So, the whole ‘doom and gloom’ build up to this aspect of the budget was a bit of a storm-in-a-teacup and a huge relief to many.

However, as the dust on this issue starts to slowly settle many buyers currently proceeding with purchases above these thresholds are asking how it’s going to affect them.

It’s still uncertain how properties will be assessed as Council tax bands haven’t been updated since 1991, yet with property taxation firmly in Labour’s sights, an earlier revaluation is very possible.

Even so, the new tax will not come in to play until April 2028.

There’s also the longer-term picture: Even if a seller agreed to a modest discount from a current agreed sales price to avoid the charge now, there’s no guarantee of how long that protection to the buyer would last.

Buyers are currently speculating that any additional tax burden could also affect future resale prospects, particularly if the levy rises over time.

Equally, (and very likely) a change of government by August 2029 could see the policy revised or removed entirely.

But there are a few thoughts to make on this.

At what point do you consider NOT buying your dream home for the sake of a few extra thousand pounds a year?

These days people are so hung up on investment, ‘the deal’ and capital appreciation, that buying a ‘home’ that you love, where you can bring up a family or simply just enjoy, seems to take a back seat.

You shouldn’t base any purchase simply on policy - affordability yes….unless you are buying purely for investment.

In the grand scale of things, those that can afford a £5,000,000 property can most likely afford an extra £7,500 of outgoings a year (and I’m no socialist).

So before trying to negotiate too hard with the seller and risk losing a home you genuinely want, consider this.

If you are considering a long-term play over the next decade or so and given the current deals you can currently secure in central London; any property nearing those thresholds will have appreciated in value again, well above the level you are renegotiating today and any additional levy you may have to pay over that time.

Consider your long-term goals over the next five to ten years. It is likely that you will appreciate having purchased the home that best aligned with your preferences and needs rather than lose it over a few grand!

Also, if you are a seller; I would stick to your guns; it’s not your concern what happens when your buyers come to sell the property post 2028. If they really want the property, they won’t lose it over a few thousand pounds (to be paid in two years’ time!).

In short...

The property tax announcement was much ado about nothing, and, to be honest the only bit of ‘good news’ that the 2025 Budget had to offer.

I, like others, breathed a sigh of relief and so should many buyers and sellers.

Let’s hope this welcomes some confidence back into the market after such a painful ‘wait and see’ mindset of so many.

I’ve said it before and I’ll say it again, any market is difficult to predict; however the current London property market which has all but ‘flatlined’ is for once, very predictable.

Finally, please rest assured, this government will not see another term.

The first murmurings of the next general election will see an influx of buyers returning to the market in anticipation of new business, property and visa reforms; and if a new government is hailed, we will also see the welcome return of the countless UK millionaires who have temporarily gone in to hiding.

Now is the time to buy - you have been warned.