I live in a semi-detached house in Surrey with my husband and son which is worth £900,000.
We wanted to upsize as we’d like to have another child, so we sold it and had an offer accepted on a four-bed home in a neighbouring village at £2million.
It’s a lot of money, but we’re lucky to have benefited from price rises on our current place and we’d also be taking a big mortgage.
After the Budget, it means we’d be subject to the new mansion tax of £2,500 per year in our new home, from 2028. Should we now try and negotiate the price down so we don’t have to pay? If not, should we pull out and look for somewhere slightly cheaper – or stay put in our home for now?
We can afford it, but would obviously rather avoid it – and are worried it would put off buyers if we sold the home years down the line, especially given the levy rises with inflation every year.
And how will it be decided whether a home is worth £2million or not? I understand the valuation will be based on 2026 prices so, say we paid £1.99 million when we complete next year, would the home be safe from the tax forever – or would they revalue homes again in the future?
Upsizing: This reader has had an offer accepted on a £2m home – but is concerned about the future tax implications after Rachel Reeves’ Budget (stock image)
Helen Crane of This is Money replies: The Budget has certainly put a spanner in the works for people like yourselves, who are buying a family home in the south of England.
Rachel Reeves announced the biggest change to council tax in three decades. Properties in England worth more than £2million will now face a surcharge on top of their council tax, dubbed a ‘mansion tax’.
This will start at £2,500 per year and go all the way up to £7,500 for the most expensive properties. It will rise by inflation each year.
As you say, buying a home worth £2million is unfathomable to people in many parts of the country. But unfortunately, that’s how much a four-bed detached house will set you back in much of the capital and some of its most sought-after suburbs.
It’s still unclear exactly how properties will be valued for the purposes of this tax, but it seems the home you are buying is at risk of being caught.
And then there is the future to consider. If the seller agreed to a slight discount, you could be lucky and escape the tax this time. But for how long?
The current council tax bands have stayed the same since 1991, but with property taxes in Labour’s crosshairs, another revaluation could come sooner.
An extra tax burden could make the house hard to sell down the line, especially if the tax was increased. On the other hand, a future Government of different stripes might scrap it altogether.
So what should you do? I asked three property experts for their view.
Unclear: We don’t know exactly how the Government will value expensive homes
Should she pull out of the purchase?
James Evans, chief executive of London real estate agent, Douglas and Gordon, says: My advice to anyone buying a family home is simple. Make the decision that feels right for you, as long as the financials are comfortable.
A home is where your family grows and builds its life. That matters far more than any policy detail.
You’re considering this house because you love it. If you can afford it, buy it and enjoy it. The mansion tax shouldn’t be the deciding factor on something so personal.
Looking ahead, if you sold in ten years’ time, you’re likely to achieve more than you paid.
Go into the purchase assuming you’ll be within scope of the mansion tax from 2028. If it turns out you’re not, that’s a bonus rather than something to bank on.
Should she negotiate a price cut?
Paula Higgins, chief executive and founder of HomeOwners Alliance, says: Right now, buyers looking at properties over £2million are in a better negotiating position than sellers.
The announcement of a mansion tax means more high-value homes are likely to come onto the market as owners try to sell before the tax takes effect.
More supply at that level weakens sellers’ position – especially if they know buyers are factoring in a new annual cost.
So yes, you should absolutely try to negotiate, and sellers should expect that.
Even if the seller won’t reduce the price, it’s entirely reasonable to ask – you now have a transparent, factual reason.
Nigel Bishop, founder of buying agent Recoco Property Search, says: There are many house hunters who can sympathise with you as they are facing exactly the same predicament following the Budget announcement.
As a buying agent, we are on the buyer’s side and frequently negotiate price reductions; particularly if there are valid economic reasons to do so.
The Chancellor’s annual levy will give you some ammunition during price negotiations, and it is likely that the current vendors have been advised by their agent that buyers will question the asking price.
Provided that you are able to exchange contracts swiftly, the seller might be inclined to enter price negotiations but this very much depends on their personal circumstances and expectations.
How will properties be valued for the mansion tax?
Bishop says: We are somewhat second-guessing the future. It is currently unclear how exactly the Government plans to re-evaluate properties.
And once it does, it could very well put your new home above the £2million threshold after all, even if you negotiate the price down now.
I would therefore advise you to consider your personal situation and the bigger picture, and how not buying the property now could affect your family plans.
You could be missing out on the opportunity to elevate your family’s lifestyle and regret not moving forward just to have saved £2,500 a year.
Higgins adds: Even paying £1.99million does not guarantee you’ll avoid the mansion tax. This is a key point many people are missing.
The tax threshold will be based on official valuations, not on the price you pay.
So even if you negotiate to £1.95million or £1.99million, your home could still be valued at over £2million in 2026.
We don’t know how the valuations will work but they go beyond then the price paid. A valuer will likely take into location, size, condition, layout, and overall market appeal.
Paula Higgins, chief executive and founder of HomeOwners Alliance, says buyers are in a strong negotiating position
Will the goalposts be changed again in future?
Higgins says: The Government has promised further information in the new year but it has said that it intends to revalue properties every five years.
So, there is no guarantee that paying under the threshold when you buy will keep you out of the system long-term.
Homes will also not be ‘safe forever’: future governments may revisit thresholds or revalue bands, just as they have with council tax.
But it is likely that the mansion tax will be the new normal for future buyers.
Where are house prices headed?
Evans replies: I believe prices, particularly in and around London, have been subdued for too long.
If the market rises, even modestly, the value uplift on a £2million property compared to a £900,000 one could comfortably outweigh the £2,500 per year levy.
That’s worth keeping in mind before trying to negotiate too hard and risking losing a home you genuinely want.
The bottom line is this: if buying this house will improve your family’s life and you can afford it, go for it. Don’t let the levy dominate the decision.
Think about where you want to be in five to ten years. Chances are you’ll be glad you bought the home you truly wanted.
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