The so-called mansion tax is already beginning to have an impact on the UK housing market, despite the surcharge not being due to come into effect until April 2028.
Under the new tax, formally known as the High Value Council Tax Surcharge, homes in England worth £2 million or more, based on their value as of April 2026, will face an annual charge on top of their council tax.
Some sellers appear to be pricing homes just under £2 million to attract buyers who want to avoid paying the incoming council tax surcharge.
How is the housing market changing?
According to a report by Tax Policy Associates, sales at exactly £2 million made up 2.70 per cent of completed sales between £1.7 million and £2.3 million from December 2025 to July 2026, down from 5.69 per cent in the same period a year earlier.
At the same time, the share of sales priced within £10,000 below the mansion tax threshold rose roughly fivefold, from 0.44 per cent to 2.27 per cent.
Tax Policy Associates describes this as clear evidence of prices bunching below the threshold, although it has not yet found evidence of a wider fall in property values.
The annual surcharge bands are as follows:
What are the risks with an artificially low property price?
While sellers can distort their asking price in an attempt to avoid the tax, the Valuation Office is expected to use comparable sales and property characteristics to assess which properties sit above the £2 million threshold.
This means tax liabilities will depend on assessed value, calculated using a combination of sales data and technology-driven modelling, rather than simply what a property is sold for.
Therefore, sellers who artificially drop their price to below the threshold may not achieve the intended tax outcome, as the buyer may still be liable to pay the surcharge.
Buyers and sellers may try to make up the costs elsewhere, such as inflated payments for furniture or fixtures, but this is also risky.
As Stamp Duty Land Tax is levied on property transactions, HMRC scrutinises extra charges to determine if they are just and reasonable and at fair market value.
If they are deemed to be disproportionate, the buyer may face extra tax and even interest and penalties.
Do you own or are looking to sell a home worth £2 million or more? Speak to our team for advice on your tax position.
Jim Botton – Pleasure Beach (Skegness)
