13 years for the reason that Liberal Democrats first proposed a Mansion Tax on properties over £2 million, the Treasury is reportedly contemplating the identical plan.
Even the proposed threshold is equivalent, which tells you all the pieces it’s good to find out about home worth inflation since 2012. Common values in prime central London have fallen by 8% over the interval.
Satirically, it was the unique Mansion Tax plan that helped deflate the market. It was by no means launched however prompted Tory chancellor George Osborne to extend stamp responsibility for high-value properties in December 2014, and demand in prime markets has by no means totally recovered.
It’s a reminder of how property taxes typically include unintended penalties. For those who tax so-called mansions, you’ll find yourself with fewer of them.
Simply over 150,000 properties in England and Wales would fall into the bracket right this moment, in accordance with Knight Frank calculations. The Mansion Tax hearsay is the newest in a collection of concepts circulating forward of the Price range on 26 November because the Chancellor makes an attempt to plug a £30bn fiscal gap.
The record of areas that might be most impacted is predictable and would inevitably result in accusations of the levy being a tax on London, because the desk reveals.
| Native Authority | % of properties above £2m |
| Kensington and Chelsea | 18.5% |
| Westminster | 12.3% |
| Elmbridge | 7.5% |
| Richmond upon Thames | 7.2% |
| Camden | 6.9% |
| Hammersmith and Fulham | 4.5% |
| Merton | 3.6% |
| Waverley | 3.3% |
| Wandsworth | 2.9% |
| Sevenoaks | 2.9% |
| Windsor and Maidenhead | 2.8% |
| Metropolis of London | 2.5% |
| Barnet | 2.4% |
| Three Rivers | 2.3% |
| Guildford | 2.3% |
| St Albans | 2.2% |
| Islington | 2.2% |
| Cotswold | 2.0% |
| Haringey | 2.0% |
| Runnymede | 2.0% |
Supply: Land Registry and Knight Frank Analysis
Primarily based on the proportion of affected properties in Okay&C and Westminster, the equal Mansion Tax threshold within the West Midlands could be £408,000. In north-east England, the determine could be £288,000, in Wales it will be £367,000 and for London as a complete, it will be £829,000.
It suggests the time period ‘mansion’ is deceptive, not that the federal government received’t be quietly happy with the latest headlines. They’ll solely assist pacify its backbenchers and stem rising assist for the Inexperienced Celebration.
Speed up downsizing
Arguments made in 2012 that some long-term householders could be unable to pay the tax stay legitimate. It might catch out pensioners whose home has appreciated in worth whereas their revenue has gone in the other way.
This, in flip, may result in extra downsizing. It might end in a extra environment friendly use of the nation’s housing inventory, however assumes homeowners are prepared or keen to go away a neighbourhood they could have lived in for many years.
One constructive interpretation of the newest hypothesis is that the Treasury could also be transferring away from the concept of capital beneficial properties tax (CGT) on higher-value fundamental houses. Throughout the backwards and forwards that’s presently happening between the Workplace for Price range Duty and Quantity 11, somebody will need to have identified that the CGT plan may increase far lower than anticipated.
Focusing on a transaction-based tax on the one part of the property market who’re most capable of sit on their palms is a high-risk technique.
In the end, any resolution will rely on how backed right into a monetary nook Rachel Reeves is and the way ready she is to interrupt manifesto commitments to not increase revenue tax, VAT or Nationwide Insurance coverage – as we’ve got mentioned on earlier Housing Unpacked podcasts.
Costs slide
Due to the Price range hypothesis, common costs in prime central London (PCL) fell 4% within the 12 months to October, which was the steepest decline since February 2021, Knight Frank knowledge reveals.
Values have been final greater in October 2011, that means there could be no capital beneficial properties to tax on properties purchased since then anyway.
Common costs fell by 0.1% over the past 12 months in prime outer London. It might be incorrect to completely blame the Price range, however the extended tax hypothesis hasn’t helped. Downwards stress on costs has additionally been intensifying for the reason that begin of the 12 months because of greater ranges of provide.
Whether or not the value slide in prime London markets continues into subsequent 12 months and the variety of ‘mansions’ shrinks additional is dependent upon whether or not the federal government chooses to repeat historical past or be taught from it.
Lettings – Demand Up, Provide Down: Prime London Rents Rise Forward of the Price range
The Renter’s Rights Invoice turned an Act final week after it gained Royal Assent, however little has modified besides the title.
Landlords face the identical uncertainties round hire will increase, repossession guidelines and what occurs in the event that they attempt to promote. The brand new unknown is when the reforms will take impact, with the Nationwide Residential Landlords Affiliation calling for a minimal lead time of six months.
In prime London markets, rents proceed to edge greater as extra landlords discover a sale and provide continues to drop. The variety of new rental listings in prime central and outer London in Q3 2025 was 8% beneath the five-year common, Rightmove knowledge reveals.
Common rents in prime central London rose 1.9% within the 12 months to October, which was the most important enhance since August 2024. In prime outer London, the rise was 2%.
As property values proceed to fall forward of the Price range on 26 November, one constructive consequence for landlords is that rental yields are rising.
In prime central London, common gross yields have been 4.5% in October, which is the best stage they’ve been since June 2006.
Property taxes have been the topic of intense hypothesis forward of this month’s Price range as Chancellor Rachel Reeves makes an attempt to plug a £30bn again gap to satisfy her personal fiscal guidelines.
One proposal floated within the media is to cost Nationwide Insurance coverage on rental revenue. The concept aligns with options made by Torsten Bell when he was head of the Decision suppose tank. He’s now an MP and a key architect of the Price range.
The danger for the federal government is that such a transfer proves to be inflationary, as extra landlords determine to promote or move on the fee to tenants.
In the meantime, tenant demand stays sturdy, which can maintain upwards stress on rents. The variety of new potential tenants registering in London in September was 10% greater than the identical month final 12 months, Knight Frank knowledge reveals.
Demand has been supported by the pre-Price range uncertainty, mentioned David Mumby, head of prime central London lettings at Knight Frank.
“Hypothesis a couple of host of doable tax rises within the Price range is drowning out any noise across the Renter’s Rights Act for landlords,” he mentioned. “For tenants, the gloomier issues really feel, the extra they prioritise liquidity and money within the financial institution and that’s supporting robust demand within the lettings market.”
Tom Invoice is head of UK residential analysis at Knight Frank
