The Government is preparing to introduce a high-value council tax surcharge on homes worth more than £2million, according to the OBR report, released ahead of schedule.
According to the document, the measure is forecast to generate £0.4 billion in the 2029–30 financial year.
The surcharge is expected to apply to the top end of the housing market and will sit on top of existing council tax bills.
This effectively increasing charges for owners of high-value properties rather than creating a standalone tax.
Council tax burden in northern cities is triple that of London, fresh data reveals | GETTYElliot Castle, CEO of leading homebuying service We Buy Any Home, said: “This new levy on properties in the top three council tax bands - F, G and H - will impact more than 100,000 homeowners.
“Given that more than 60% of homes valued at £2million or more are in London, there’s no doubt that people in the capital and South East England will feel like they’re bearing the brunt of the Treasury’s decisions today.
“We expect this could put off some buyers at the top end of the market and others will be rushing to devalue their homes in a bid to avoid this tax altogether.
'Mansion tax' confirmed
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“The hope is that these changes will be phased in gradually, once a full and fair reevaluation has been made of the outdated council tax bands, so the market isn’t shocked overnight.
“We have seen a massive stagnation in the property market over the past few months in the run-up to this Budget. A strong market needs confidence and at the moment homeowners are anxious and unsure.
“Hopefully this clarity will mean people can make informed decisions and the property market can get moving again.”
Speculation over the changes has stifled sales in the lead-up to the announcement, with research by We Buy Any Home finding one in five homeowners have put their plans to sell on ice over fears of potential tax changes by Rachel Reeves.
Rob Hillock, Head of Personal Financial Planning at leading independent financial services consultancy Broadstone said: “The Chancellor’s introduction of a ‘Mansion Tax’ on houses valued above £2 million will likely prompt many homeowners to get an up-to-date valuation of their property wealth.
“It has the potential to create market distortions as homeowners look to reduce the value of their home to avoid additional tax or prompt some to downsize to smaller, cheaper homes. The OBR notes in its comments that the reform could see price bunching below each of the four new price bands as homeowners look to minimise their tax liability.”
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