Chancellor Rachel Reeves is set to announce a sweeping Autumn Budget 2025London on November 26, 2025, introducing a controversial mansion tax that could reshape Britain’s housing landscape. The proposed levy targets roughly 100,000 to 150,000 homes valued between £1.5 million and £2 million across England and Wales, according to Knight Frank research. This marks a dramatic pivot from Labour’s 2024 election pledge — and a stark departure from the economic growth rhetoric Reeves once championed. Now, her focus is clear: "Cutting the cost of living, cutting NHS waiting lists and cutting the cost of debt." The reason? A £22 billion fiscal black hole, after the Office for Budget Responsibility (OBR) slashed its growth forecasts through 2029.
What the Mansion Tax Could Look Like
Three versions of the tax are under serious consideration. The most straightforward: a 1% annual charge on the portion of a home’s value above £2 million. For a £2.5 million property, that’s £5,000 a year — not trivial, but manageable for some. Another option is far more disruptive: scrapping the capital gains tax (CGT) exemption on main homes sold by higher-rate taxpayers if the property exceeds £1.5 million. That’s a direct reversal of Sir Kier Starmer’s July 2024 promise that people would "absolutely" not pay CGT on their primary residence during the next parliament.
Then there’s the most radical proposal: a national property tax applying to all homes over £500,000, with rates climbing from 0.54% to 0.81% as values rise. But here’s the twist — instead of annual payments, homeowners would pay the full amount as a lump sum when they sell. For a £2 million home, that could mean a one-time bill of £216,000. That’s not a tax. That’s a forced sale.
Who Gets Hit — And Who’s Been Left Out
It’s not just luxury penthouses in London or coastal mansions in Cheshire. The Hamptons estate agency estimates 4,300 second homes — already paying double council tax — would be caught in the net. But the real shocker? Typical family homes in Dorset, Hampshire, and the South West are now edging into the £1.5 million bracket thanks to steady price growth. These aren’t oligarchs. These are teachers, nurses, retired civil servants — asset-rich, cash-poor, and suddenly facing a tax bill they can’t pay.
And what about inheritance? Families who inherit a £1.8 million home in Edinburgh might find themselves hit with both inheritance tax and this new levy — even if they never lived in it. Carbon Law Partners warns of a "cliff edge" effect: someone owning a £1.49 million home pays nothing. The moment it hits £1.5 million? A tax bill that could force a sale.
Market Disruption and Political Backlash
Jeremy Leaf, former chairman of the Royal Institute of Chartered Surveyors, doesn’t mince words: "This will cause market disruption." He’s right. The South East and London markets, where prices have surged past £1.5 million even for modest semi-detached homes, could freeze. Sellers won’t want to trigger the tax. Buyers will hesitate. Transaction volumes could plummet.
And then there’s the political cost. Labour promised not to raise taxes on primary homes. Now they’re proposing to tax them — in ways that could hit pensioners, single parents, and rural homeowners. The contradiction is glaring. Even Savills and Baggette acknowledge the policy risks alienating the very voters Labour needs to hold onto.
Implementation Delays and Administrative Chaos
Don’t expect this to start on April 6, 2026 — even if it’s announced on November 26. The Treasury is still debating whether to use HMRC, local councils, or a brand-new self-assessment system. Bebeez reports that around 300,000 properties in council tax bands F, G, and H could be affected — but only if the threshold is set at £1.5 million. If it’s £2 million? That drops to 150,000. The difference? 150,000 families.
And here’s the kicker: no one has figured out how to value homes fairly across the country. A £1.7 million house in Bath isn’t the same as one in Middlesbrough. But the tax doesn’t care. It’s based on price alone.
Part of a Bigger War on Wealth
The mansion tax isn’t standalone. It’s one weapon in a broader arsenal. Reeves is also weighing a profits tax on gambling companies — a demand once pushed by Gordon Brown — and a levy on bank profits. All designed to plug the £22 billion hole left by the OBR’s grim outlook. But these aren’t just fiscal fixes. They’re ideological shifts. Labour is moving from growth-focused economics to redistribution. Whether voters will accept that — especially when their homes are the target — remains the biggest question of all.
Frequently Asked Questions
How many homes will actually be affected by the mansion tax?
Estimates vary, but Knight Frank data suggests 150,000 homes in England and Wales exceed £2 million, while Hamptons and Savills estimate 100,000–150,000 homes fall within the proposed £1.5 million–£2 million range. If the threshold is lowered to £1.5 million, up to 300,000 properties in council tax bands F, G, and H could be impacted — including many middle-class families in southern counties where prices have risen steadily but incomes haven’t.
Why does this contradict Labour’s election promises?
During the July 2024 general election, Labour leader Sir Kier Starmer explicitly guaranteed voters they "absolutely" wouldn’t pay capital gains tax on the sale of their main home. The proposed removal of private residence relief for properties over £1.5 million directly breaks that promise. This has triggered criticism from both opposition parties and Labour’s own supporters, who feel misled on a core issue of household security.
When would the tax take effect if announced in November 2025?
Even if the tax is announced on November 26, 2025, implementation is unlikely before April 6, 2026 — the start of the next tax year. The Treasury needs time to design systems, update property valuations, and train HMRC staff. Some proposals, like the lump-sum payment on sale, would require entirely new legislation and digital infrastructure, making delays almost certain.
Could this tax push people to sell their homes?
Absolutely. Homeowners facing a potential £200,000+ tax bill upon sale may rush to offload properties before the law takes effect — especially in high-value areas like London and the South East. Others may choose to stay put, reducing housing mobility. This could worsen the UK’s housing shortage, particularly for younger buyers seeking smaller homes in expensive regions.
What’s the difference between a mansion tax and the proposed national property tax?
A traditional mansion tax applies only to ultra-high-value homes — usually above £2 million — with an annual charge. The alternative proposal targets homes over £500,000, applying progressive rates that scale with value, but collects the full amount as a lump sum when sold. The latter would affect far more people, including middle-income households in growing regions, turning a tax on luxury into a broad-based levy on homeownership.
How does this compare to previous wealth taxes in the UK?
The UK last had a wealth tax in the 1970s, and it was scrapped due to administrative complexity and avoidance. The 1990s council tax system was designed to be a flat-rate local tax, not a progressive wealth levy. This proposal is the most ambitious since then. Unlike the failed 1990s wealth tax, however, this one is tied to property — a less mobile asset — making evasion harder, but also making it more politically explosive.