The Autumn Budget descended into chaos after the Office for Budget Responsibility accidentally released its economic and fiscal risks report – a document that lays out, in detail, the Chancellor’s tax rises and long-term fiscal plans.
The leak confirms that Rachel Reeves intends to raise £26 billion through a mix of threshold freezes and new charges, pushing the overall tax burden to a record 38% of GDP by 2031. Among the most contentious measures is the new “mansion tax” on homes valued above £2 million.
A three-year freeze in income tax thresholds will generate an estimated £8 billion for the Treasury, while tighter rules on pension contributions are forecast to add a further £4.7 billion.
But the biggest shockwaves are rippling through the UK housing market, where agents and analysts warn the mansion tax could distort behaviour, slow transactions and lock up supply. Market data was already pointing to a slowdown ahead of today’s statement, with uncertainty driving caution across all price points — but especially at the top end, where expectations of tax changes have hung over negotiations for weeks.
UNFAIR PRIVILEGE TAX
Scott Clay, director at Together, said: “Confirmation of the mansion tax is really concerning to see.
“This is essentially an unfair “privilege” tax for homeowners with properties worth £2 million plus, who will now have to pay an annual charge, for the home they already own.
“If the goal was to make winter feel even harsher, mission accomplished. Many recent buyers have already paid for the property, plus stamp duty, and now face an extra annual surcharge on top of council tax and mortgage payments.
“It’s unlikely the government will carry out any affordability checks, so lenders will need to factor this additional cost into mortgage assessments for homes above the threshold.
“Those hit hardest will be ‘empty nesters’ and people who bought their property decades ago simply as a family home, not as an investment. Asset-rich but cash-poor older homeowners could really struggle, as this tax could be equivalent to an entire year’s state pension.”
RISKY MOVE
Nick Sanderson, Audley Group CEO, said: “Opting to play with taxes at the top of the housing market is inherently risky.
“The top of the ladder is often the driver of market movement and the new mansion tax will undoubtedly put the brakes on.
“Larger family homes become immediately less appealing to prospective buyers, particularly in areas where house prices have grown significantly like the South East.
“The government had an opportunity to get the housing market functioning as intended. Instead, it has introduced counterproductive barriers which will lock up valuable housing stock, reduce transactions and put yet more pressure on the housing market.”
YEARS OF UNCERTAINTY
Tom Bill, head of UK residential research at Knight Frank, said: “Until the revaluations take place, buyers and sellers face years of uncertainty, especially around the £2 million threshold. Even once completed, new valuations can be challenged, which would prolong the limbo.
“The policy may also raise less than expected, especially because it is deferrable. If opposition parties say they would scrap it, many homeowners will look at the opinion polls and wait it out. When you factor in the cost of carrying out the valuation and the potential lost stamp duty revenue from a stickier market, the sums raised could look like a rounding error for the Treasury.”
And he added: “More properties will inevitably get dragged into the mansion tax net, which means the proportion of terraced houses, flats and semi-detached homes will grow over the years, particularly in the capital. The term ‘mansion tax’ will increasingly feel like a misnomer.
“Overall, it feels like politics has trumped economics. One the one hand, the policy is designed to keep backbenchers happy and ensure the near-term survival of the Chancellor and Prime Minister.
“On the other, it throws a spanner into the works of the housing market for not much money in return, which is important in the context of a Budget where spending is front-loaded. The UK already pays the highest percentage of property taxes among OECD countries.”
MARKET CATALYST
Stuart Bailey, head of super prime London sales at Knight Frank, added: “In just over 24 hours prior to the Budget, our London teams exchanged on £90m of property, far exceeding an average Tuesday.
“Speculation around anticipated tax changes has acted as a catalyst for the market in recent weeks, across all levels of the housing ladder.
“Whilst some buyers and sellers have wanted to get ahead of the Budget, others are waiting to see, and we will likely experience some renewed activity immediately post Budget too.”
PUNISHMENT TAX
Nigel Bishop, founder of buying agency Recoco Property Search, said: “This tax is an outright punishment for those who have been able to buy a property decades ago, that since has gone up in value. It could mean financial ruin for many of these homeowners.
“A vast majority will have no other option but to sell up; likely at reduced asking prices. In theory, this frees up larger homes but doesn’t automatically mean there will be buyers waiting.
“On the contrary, I believe that the Chancellor’s idea of mansion tax will grind the property market to a halt.”
ASSET RICH, CASH POOR
James Nightingall, founder of HomeFinder AI, says: “A vast number of London property owners will be hit by Mansion Tax, particularly in central London where property values quickly exceed the £2m threshold.
“The problem is that the majority of these homeowners are asset rich but cash poor and will struggle to finance an annual levy of this magnitude.”
RUSH TO SELL
Matthew Thompson, head of sales at Chestertons, added: “We could see homeowners rushing to sell their home before the new tax takes effect but buyers will think twice to purchase a home that will be subject to such a levy in the future.
“This could lead to more high-value properties standing empty or force sellers to drastically reduce their asking price.”
UNCERTAIN TIMES AHEAD
Simon Main, Partner at Cripps, said: “It is clear that the government’s ‘mansion tax’ will have a significant impact on the pricing, liquidity, and long-term ownership strategies in the prime central London market.
“From a legal perspective, much remains uncertain. Key questions, such as how properties will be valued, who will carry out the valuations, and who will bear the costs, suggest the application of any such levy will be fraught with difficulties.”
DAMAGING AND COUNTERPRODUCTIVE
Jo Eccles, founder and managing director of Eccord, said: “The continued pursuit of those with wealth is deeply damaging and counterproductive.
“It doesn’t just impact the ultra-wealthy who are highly mobile and now have another reason to move elsewhere, at a significant loss to the UK economy.
“With the threshold set at £2 million, this measure directly impacts London’s upper-middle classes – who are typically households with mortgages and finite resources.
“Their outgoings can only stretch so far. Sentiment and morale are being pushed even lower, and many of them no longer view the UK as a place for prosperity where hard work and success are encouraged.
“One city professional told me recently that VAT on school fees alone is costing him an extra £700 a month, and if a mansion tax is added on top he will move to Switzerland. For many like him, this will be the final straw.
“This measure is likely to create a cliff edge at the £2m million mark.”
“This measure is likely to create a cliff edge at the £2m million mark and would effectively freeze the market just above it.
“We could see pressure on properties above those levels as sellers are forced to shoulder part of the burden by reducing their asking prices. And what about tenants? If this tax is collected through council tax then the liability will sit with them, pushing rents down and further discouraging landlords to stay in the market.”
DISTORTED BUYER BEHAVIOUR
Jason Tebb, President of OnTheMarket, says: “This will hit London and the South East hardest, where 80% of £2m+ homes sit.
“The market is now being faced with distorted buyer behaviour, price stagnation at the top end, and a ripple effect across the wider market. Ironically, it could even undermine the very tax revenue it aims to raise as transactions drop in response.
“Those who will be hit hardest are retirees or long-term owners who bought their homes decades ago. Their property value may have doubled or trebled, but their pension income has not. They could now be facing tax bills that exceed their disposable income.
“The market impact may well be a “ceiling” effect just below the £2m mark with sellers forced to reduce asking prices to make the property attractive to buyers avoiding the surcharge. This was the effect of historic Stamp Duty “ceilings” in which properties above £250k saw a straight jump from 1% to a 3% rate, so buyers were offering £249,999 on properties on the market for as much as £270k.
Current Council Tax bands remain based on valuations from the early 90s (1991). To implement this surcharge, the Valuation Office Agency must revalue high-end properties in the context of today’s market.
This is complex, subjective, and likely to lead to a massive spike in appeals and litigation from owners challenging their valuations to get under the £2 million threshold.”
TOUGH BUDGET FOR LANDLORDS
Hugo Davies, chief capital officer and managing director for Mortgages at LendInvest, said: “This is another tough Budget for landlords and property investors, with higher taxes on rental income, capital gains and pension contributions.
“It will squeeze returns for many smaller, individual landlords. But it will also accelerate a trend we’ve seen for years: the shift toward larger, professionalised Buy-to-Let operators and portfolio landlords, whose structures are far more resilient to government tax changes.”
LOCAL MARKET DISTORTION
Amy Reynolds, head of sales at Antony Roberts, says: “Limiting the 2028 revaluation only to bands F, G and H will inevitably create new cliff edges between properties in band E and those pushed into higher bands.
“Homes on the same street will fall either side of an arbitrary threshold, triggering disputes, appeals and a huge amount of administrative red tape – all of which will cost local authorities time and money to resolve.
“And crucially, this partial revaluation won’t even deliver an immediate financial benefit. Because the changes are deferred until 2028, the measure is actually a cost, not a revenue-raiser – yet another layer of bureaucracy with no short-term gain.
“Given that council tax hasn’t been comprehensively updated since 1991, it would be far more sensible to invest the time in revaluing all council tax bands.
“A full, nationwide update would modernise a system that no longer reflects today’s property market and would deliver far greater fairness between postcode areas, rather than embedding outdated anomalies for another generation.
“After almost three months of political theatre and speculation, this Budget should have offered clarity and direction. Instead, it lands as a damp squib: big build-up, little substance, and no meaningful reform where it’s most needed.”
POLITICAL THEATRE
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Mansion tax change seems more political than anything bearing in mind the relatively little additional revenue to be raised and the likely deferred payment date. As a result, the impact on housing market activity will probably be minimal at worst.
“However, I wish the Government luck trying to re-value all those properties and dealing with the arguments around the ‘pinch points’. As a result, the cost of the exercise could turn out to be higher than the extra sums making their way into Treasury coffers.
“As is often the case when attempting to analyse the Chancellor’s words on these occasions – it’s just as important what she says as what she doesn’t say.”
SOFTEN DEMAND
Daniel Austin, CEO and co-founder at ASK Partners, says: “The Mansion Tax announced in today’s Budget will likely soften demand for higher-end homes, especially those near the £2 million threshold where the impact is greatest.
“While the super-prime market may absorb the charge, the wider upper tier can expect renewed price pressure and slower growth.
“We may see a brief pre-implementation rush, but just as many owners could delay selling to avoid the levy, reducing turnover and constraining supply. The burden will fall hardest on asset-rich, cash-poor households in high-value areas such as London.
“It is disappointing that stamp duty reform was overlooked. As one of the biggest barriers to market mobility, leaving it untouched will continue to create friction in an already subdued market. The OBR’s downgraded growth forecasts, as a result of the budget, prove that supporting transactions should have been central to today’s package.”
FROZEN MARKET
Paula Higgins, Chief Executive of the HomeOwners Alliance, says: “The immediate result will be a freeze in the top end of the market as buyers and sellers wait for the outcome of the valuations.
“We’ll wait to hear further details about how the High Value Council Tax Surcharge – or mansion tax – will be set up in the planned public consultation in early 2026.
“But our initial response is we’re sceptical about whether the revaluation needed for this mansion tax can be delivered cleanly and on time. A mass revaluation of bands F to H will inevitably trigger large numbers of appeals. Without clear valuation rules, adequate resourcing, and a straightforward process people can trust, this risks becoming chaotic, slow, and deeply contentious.
“Another key concern for homeowners is whether this is the thin end of the wedge?”
“Another key concern for homeowners is whether this is the thin end of the wedge? Once measures are introduced, they have a habit of being extended or thresholds not being updated, and more people end up paying tax as a result.
“This mansion tax could quickly become relevant for more homeowners than the Chancellor anticipates.
“We expect these arbitrary thresholds of a mansion tax will distort the market, which OBR has recognised will cause bunching of sales just below the thresholds.
“We need to remember that people living in high-value homes aren’t always cash-rich. Many are stretched, still paying big mortgages, and have simply ridden a wave of rising prices.
“A mansion tax would freeze investment in homes over £1million overnight, as owners hold back on improvements to avoid being pushed over a threshold the government will almost certainly freeze.
DISCOURAGE DOWNSIZING
Simon Brown, Chief Executive, Landmark Information Group, says: “Any property tax that rises steeply with value risks slowing the housing market at a particularly delicate time.
“We know from our data that affordability pressures and slow transaction times are already constraining activity. Adding new costs at the higher end of the market could discourage downsizing, keep larger family homes off the market and reduce overall mobility.
“A well-designed property tax should support a healthy flow of transactions and help strengthen, not stall, activity across the wider housing market.
“For the government to achieve its goals without dampening consumer and industry confidence, this new system must be implemented transparently and underpinned by accurate, up-to-date valuation data.”
More to follow…
