Chancellor Rachel Reeves is preparing to introduce a new property levy targeting high-value homes worth more than £2 million, a measure expected to affect over 100,000 properties and place additional pressure on London’s already weakened luxury housing market.
A Scaled-Back Version of Initial Plans
Reeves originally considered imposing an annual council-tax surcharge on homes valued above £1.5 million. However, strong resistance from Labour MPs representing affluent constituencies forced the Treasury to raise the threshold to £2 million.
MPs had warned that a £1.5 million cutoff could unintentionally impact large numbers of Labour-leaning professionals — including teachers, civil servants, and NHS workers — particularly in London, where property values remain significantly higher than the national average.
While some MPs pushed for an even higher threshold of £2.5 million, the final figure of £2 million is now confirmed by officials involved in Budget preparations.
Revenue Expectations and Political Significance
The surcharge is expected to raise £400–£450 million per year, a modest sum compared with the estimated £30 billion fiscal gap Reeves must address in her Budget.
Nevertheless, the chancellor views the tax as an essential political signal, reinforcing Labour’s pledge that “those with the broadest shoulders” should contribute more.
The new levy will:
- Apply on top of existing council tax bills
- Function on a sliding scale based on how far a property exceeds the £2 million threshold
- Cost affected homeowners an average of around £4,000 a year
- Be paid directly to the Treasury, not local councils
Revaluation of High-Value Properties
To implement the policy, Reeves will announce a revaluation of homes in the top three council tax bands — F, G, and H — marking the first such update since 1991.
Because revaluation is a lengthy process, revenue from the new tax is unlikely to reach the Treasury before 2028. Homeowners will be permitted to defer payments until they sell the property or upon death.
Market Impact Already Visible
Estate agent Savills estimates that 145,000 homes in Great Britain exceed the £2 million mark, predominantly in London and the south-east.
Prices in London’s most expensive boroughs are already under pressure:
- Kensington & Chelsea: –11.3% year-on-year
- Westminster: –14%
- City of London: –15%
Analysts suggest the new surcharge could deepen declines in the capital’s top-tier market, where sentiment has been subdued for several years.
