As many as 165,000 homes could be hit by the government’s mansion tax in the policy’s first year, estimates from the government’s Budget watchdog have shown.
The high-value council tax surcharge – often referred to as a mansion tax – will take effect in 2028 and apply to properties valued at more than £2m.
The Office for Budget Responsibility (OBR) estimated 165,000 properties will be affected in the policy’s first year, rising to 167,000 in 2030. This is an increase from initial estimates, which put the number of homes to be affected at about 120,000.
But the OBR also forecasted that 20 per cent of homeowners could appeal against their re-evaluation and that up to 40 per cent of appeals could be successful due to narrow price bands.
The surcharge will be introduced in four price bands, starting at £2,500 annually for properties worth more than £2m, rising to £7,500 for those exceeding £5m.
A re-evaluation of high-value homes will determine the new tax, which is expected to impact properties across council tax bands F, G, and H.
Shadow housing and local government secretary Sir James Cleverly criticised the tax for “punishing people who have worked hard to provide for their families”.
“Under Labour, everyone is paying more council tax. Not content with hiking council tax on an average Band D home by £1,143 across this Parliament, they are now hitting family homes with yet another punishing charge.
“The OBR’s own figures show it harms the wider economy and housebuilding, reducing other tax revenue”, he said.
It is estimated the new surcharge could increase council tax bills by more than 22.5 per cent for the hardest-hit homeowners.
Sir James added: “This is a tax that punishes people who have worked hard to provide for their families and is just the latest step in Labour’s plan to send council tax soaring across England.
“It is clear that to close the black hole in revenue from this tax, Rachel Reeves is going to look to widen its scope even further.”
The surcharge, announced by Rachel Reeves last year, is intended to target more expensive homes to make the system fairer, with the typical family home in England currently paying more per year in council tax than a £10m property in London’s Mayfair, according to the Treasury.
The government expects the tax to raise more than £400m in 2029-30.
The OBR’s analysis suggested the new tax could also lead to fewer expensive homes being built or may provide an “incentive” for owners to split large properties into smaller ones to avoid the extra charge.
It added: “Analysis of Scotland’s 2017 council tax reforms, which increased rates for higher bands by up to 22.5 per cent, showed no reduction in new property growth rates in bands G and H, and no evidence of properties splitting.”
The Treasury has been contacted for comment.
