The Reality of a Mansion Tax: Unworkable, Unfair, Unrealistic.

In recent weeks, discussions about a proposed “mansion tax” and other potential property-related levies have created uncertainty across the housing market. With the next budget fast approaching, buyers and sellers alike are anxious about what these changes could mean for property values and investment confidence. Having worked closely with clients across the Cotswolds and surrounding regions for many years, I believe the introduction of such a tax would have serious and far-reaching consequences for the market.

In my view, a mansion tax would be disastrous for the UK property market, particularly in the £2 million to £5 million range that underpins much of the country’s prime housing sector. These are often long-held family homes, and their owners tend to be asset-rich rather than cash-rich. An annual 1 per cent levy above £2 million would not only add an unnecessary financial burden but would also distort natural pricing across the market.

We would quickly see a price ceiling form just below the threshold, with properties typically valued at £2.2 to £2.3 million being deliberately reduced to attract buyers wanting to avoid the tax. This would suppress natural price growth, limit market mobility, and affect both sellers and neighbouring price brackets. It would also deter buyers from investing in improvements, knowing that an extension, annexe, or swimming pool could push them over the limit.

The practical implementation would be almost impossible. Property valuations have been inconsistent for years, with some homes differing by more than a million pounds. If the government has been unable to update council tax bands since the 1990s, how could it realistically revalue hundreds of thousands of homes for a mansion tax? Would there be a national team of valuers visiting properties to argue whether they are worth £2 million or £2.1 million? It is completely impractical, especially in the countryside, where no two homes are alike and where land, access, and heritage factors make comparison nearly impossible.

It would also encourage false valuations and creative accounting. We would inevitably see buyers and sellers manipulating figures to stay below the limit, for instance purchasing a house for £1.9 million and paying inflated amounts for fixtures or contents. It would create an artificial valuation system, damaging transparency and confidence in an already fragile market.

High value homes already generate substantial revenue through stamp duty, inheritance tax, and VAT on maintenance and renovation. Adding another recurring charge would further erode liquidity, deter international buyers, and reduce inward investment. Those who purchased homes at £1.5 to £1.6 million with the intention of investing in upgrades or extensions would hesitate, slowing construction and local economic activity.

The reality is that this proposal is unenforceable and unreasonable. It is a political gesture with no solid foundation that would take years to administer, if it could be administered at all. Rather than raising meaningful revenue, it risks paralysing the housing market, depressing values, and punishing aspiration.

For buyers and sellers, my advice is to focus on long-term goals rather than short-term politics. Markets adjust, but sound investment decisions, good locations, and well-maintained homes will always hold their value.

As for the other rumours of new taxes, such as inheritance tax changes or capital gains tax on main residences, these too would be an unmitigated disaster and would be opposed by everyone. It is worth thinking through the implications of how such measures could be enforced in practice.

I can think of a property that was bought for £8,000 some 55 years ago and is probably worth £1.8 million now. How could anyone accurately calculate the capital gains on that, considering it has had extensive alterations and improvements over the years, all with receipts and bills to prove it? If they plan to enforce Capital Gains Tax, when would the start point be? Would it begin on 1st January, so anyone who buys after that becomes liable when they sell? If that is the case, we will not see any real evidence of it for years to come, certainly not while this government remains in power.

If they intend to backdate it, I simply do not see how it could be enforced, policed, or implemented. It is completely unrealistic.

In terms of the market, yes, it has slowed. That said, there is a small spike at the moment, with people rushing to get their exchanges completed before the budget. I have four clients currently working towards exchange before the end of November for exactly that reason. At least we know what we are dealing with now and what the numbers are, and we know it can only get worse.

The slowdown is largely because many vendors are sitting on their hands, waiting to see what happens. Some are pushing ahead quickly to get deals over the line, so there is still a flurry of short-term activity. Once the budget is out and we see what is planned for property taxes, we will be able to make a proper judgment.

Right now, this uncertainty is damaging confidence and destabilising a market that is absolutely fundamental to the health of the wider economy.