2026 – Mansion Tax – who does it affect?

2026 – Mansion Tax – who does it affect?

Announced at the 2025 Budget by the chancellor, where it was called ‘the high value council tax surcharge’ (HVCTS), the mansion tax was released with fanfare from the government.

At the time it was revealed that properties worth over £2m would face a £2,500 annual charge, and this would increase to £7,500 for properties worth over £5m.

A recent report from the Office for Budget Responsibility (OBR) has found that the surcharge will affect 165,000 homeowners when it comes into effect in two years’ time.

The OBR report stated that 71,000 homes in the first price band (£2m-£2.5m) would be taxed, 54,000 in the second band (£2.5m-£3.5m), 25,000 homes in the third band (£3.5m-£5m), and 15,000 homes in the top band (over £5m).

As speculated at the Budget, the OBR report stated: ‘There may be a reduction in the delivery of high-value new builds as housebuilders adjust their output to reflect the impact of the tax on their expected returns.’

The OBR stated: ‘The change in the number of transactions as a result of this policy will impact both stamp duty and capital gains tax for non-primary residences.’

‘This is due to increased churn pre-implementation driven by sales from households who are unable to afford the tax, and post-implementation driven by households downsizing to reduce their liabilities.’