Owners of homes worth more than £2m will face a new annual surcharge of at least £2,500 a year under plans unveiled in the Budget.
Properties valued above £2m by the Valuation Office Agency from April 2028 will incur a recurring levy, paid in addition to council tax.
The charge will apply across four pricing bands, rising from £2,500 a year for homes valued between £2m and £2.5m to £7,500 for those worth £5m or more. This measure is forecast to raise about £400m in 2029.
After days of speculation, the new levy was effectively confirmed when the Office for Budget Responsibility’s (OBR) forecast was published online in error ahead of the Chancellor’s speech.
Property analysts say the surcharge is less severe than some of the proposals trailed ahead of the Budget, but warn that it may still unsettle parts of the market. “After such a prolonged exercise in kite-flying, this is probably the least-worst outcome for owners of prime property,” says Lucian Cook, head of UK residential research at Savills, a British real estate company. Cook added that the certainty provided by a defined surcharge “will allow buyers and sellers to act on plans that have been put on hold in recent months.”
However, analysts also warn of administrative and pricing challenges as the government begins valuing high-end homes. In a report on Wednesday, Tom Bill, head of UK residential research at Knight Frank, said a revaluation of millions of properties risks creating “cliff edges” in liability and distorting demand at the top end of the market, particularly in London and the southeast.
The firm has also cautioned that many homes caught by the measure are “not traditional mansions” and that the process could lead to disputes over threshold valuations.
Cook added that, while the short-term impact may be modest, the surcharge is likely to act as a “slightly greater incentive for older owners to downsize”, but he said the policy is “not big enough to alter the central London demand-supply dynamic.”