Proposed threshold cut raises valuation disputes and retirement planning concerns for longstanding property owners
A proposed cut to the mansion tax threshold from £2 million to £1.5 million could draw hundreds of thousands of additional homeowners into an annual charge they have no reliable means of paying, particularly in London and the South East, where property values have risen sharply over decades without any corresponding increase in household income.
Formally known as the High Value Council Tax Surcharge, the tax was confirmed in the November 2025 Budget and applies to homes in England valued at over £2 million, with collection beginning in April 2028. Properties will be placed in one of four bands, with annual charges ranging from £2,500 for homes valued between £2 million and £2.5 million, rising to £7,500 for properties worth £5 million or more.
Reports that the government is considering lowering the entry threshold to £1.5 million ahead of the 28 October Budget have not yet been confirmed as policy. Analysis by Tax Policy Associates estimates that around 150,000 additional homes could be affected if the threshold were reduced.
Neal Groves (pictured top), head of personal tax at Kinbrook Group's Beavis Morgan, a London-based accountancy firm, said the distinction between asset wealth and cash wealth is being overlooked in the policy debate, and that neither the government nor the industry has done enough to make people aware of what is coming.
"It's dragging into charge people who are not always wealthy," Groves told Mortgage Introducer. "They might be asset-wealthy, but have you got the cash to be able to pay a fairly chunky tax bill each year?"
A London problem with national implications
The geographical dimension of the tax is one of its most significant design flaws, according to Groves. In parts of London and the South East, a £1.5 million property is not exceptional, it may be a relatively ordinary family home in a sought-after postcode.
"A national property-value threshold will have very different consequences depending on where someone lives," he said. "That creates a geographical concentration of the tax which needs to be understood when assessing its wider impact."
There is already evidence that the tax is reshaping buyer behaviour. Knight Frank estimates that 73,600 properties are worth between £1.8 million and £2.2 million – the valuation grey area around the proposed £2 million threshold. If that dropped to £1.5 million, the grey area would expand to 222,800 properties, trebling the size of the valuation challenge. Analysis by Dan Neidle at Tax Policy Associates also found a notable clustering of transactions just below the £2 million mark following the April 2025 stamp duty threshold changes – a pattern Groves attributes directly to mansion tax awareness among buyers who understood the implications of crossing that line.
Mortgage professionals advising clients in high-value urban markets will recognise this as more than an abstract policy question. Whether a client buys, holds or restructures their property ownership could increasingly hinge on which side of these thresholds they fall.
Groves also raised a structural quirk at the heart of the proposal. The mansion tax would be collected via council tax bills, yet council tax valuations are based on 1991 property prices, while the mansion tax uses 2026 values. "You've got this almost two-tier system being collected via the same bill," he said. "You could have a property valued below £2 million for council tax, but above £2 million for the mansion tax."
What does the valuation process mean for homeowners near the threshold?
One of the most pressing practical concerns is how properties will actually be assessed. The government intends to use desktop valuations carried out by the Valuation Office Agency (VOA) – the government body responsible for property assessments in England and Wales – an approach Groves views as deeply problematic for higher-value, individual properties.
"A lot of these properties around that sort of level, if you're buying a £2 million property, it's an individual property," he said. "There are no two properties that are going to be alike at that level. So it's going to be very difficult to value these."
His advice to clients sitting near the threshold is straightforward – act now. HMRC has indicated that VOA valuations will be issued this autumn, with a six-month window in which homeowners can challenge their assessment. Groves is urging clients to commission their own independent professional valuations before those assessments arrive.
"A firsthand visit is always going to trump someone sitting behind a desk," he said. "People need to start thinking about this now. The system is going to get overloaded."
He predicts a significant volume of disputes at the lower banding levels and questions whether the appeals process has the capacity to cope. "I strongly doubt that all these challenges are going to be resolved in six months."
Part of the problem, he argues, is that awareness of the tax remains low. Until speculation about the £1.5 million threshold broke in recent weeks, the issue had generated little attention from either government or the wider industry. "This hasn't been very well publicised by the government or the industry itself," Groves said. "People haven't been taking it as seriously as they should."
What homeowners – and advisers – should do
Despite the urgency, Groves cautions against making major financial or property decisions based on speculation. The threshold, charge structure and implementation rules have not yet been confirmed, and until they are, the precise impact on individual households remains unclear.
One point he is unequivocal on, however, is that unlike other property taxes, this one offers almost no room to manoeuvre. "There is virtually nothing you can do," he said. "If your property is worth within that band, then you have to pay it as part of your council tax." The only meaningful lever available to homeowners is the valuation challenge process, which is precisely why getting ahead of it matters.
Brokers discussing property decisions with clients in or near these value ranges will find Groves sees an opportunity as much as a challenge. Those already in the market face an unexpected ongoing liability. But buyers entering the market above the threshold do so with full awareness of the annual charge – "going in with your eyes open," as he puts it.
The burden falls hardest on those with the least flexibility to absorb it. Groves is clear about who that is: "The concern is particularly relevant for people approaching or already in retirement, whose property may represent a substantial proportion of their wealth but who rely on a relatively fixed income."
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