UK Imposes New Tax on Homes Worth Over £2 Million

Britain is preparing to impose a new annual tax on high-value homes, marking a significant intervention in the country’s already strained luxury property market. 

The measure, which surfaced prematurely after being mistakenly released by the Office for Budget Responsibility ahead of the chancellor’s statement, will apply to residential properties valued above £2 million starting April 2028. Annual charges will begin at £2,500 and rise as high as £7,500 for properties exceeding £5 million.

The tax is expected to generate around £400 million in the fiscal year 2029, although the OBR has cautioned that the policy could disrupt the broader housing ecosystem. 

Analysts warn that the new levy may distort pricing and weaken other property-related revenue streams such as stamp duty, which the government heavily relies on. The prospect of an impending revaluation is also likely to freeze parts of the market as potential buyers hold back pending clarity on how their homes might be assessed.

London’s luxury housing sector has already endured a turbulent decade, shaken by successive tax reforms that have discouraged investors and international buyers. Industry observers say the latest move risks deepening the uncertainty. 

Tom Bill, head of UK residential research at Knight Frank, criticised the policy as an example of political strategy overpowering economic logic, arguing that such a disruptive intervention will deliver only a marginal financial return. Shares of homebuilders registered declines shortly after the proposal became public.

The tax marks the first reassessment of certain segments of the UK’s property valuations since 1991, when current council tax bands were established. 

According to the OBR report, homes valued between £2 million and £2.5 million will face the lowest tier of charges, with the rate climbing across four brackets until it reaches its maximum for the costliest properties.

Beyond its immediate fiscal impact, the measure is being interpreted as a step toward a broader shift in Britain’s approach to taxation. Analysts note that the levy constitutes a rare move toward taxing wealth rather than income, raising concern that the government may be laying the groundwork for future increases. 

Anisha Beveridge, head of research at property consultancy Hamptons, described the tax as modest in its initial form but noteworthy as a precedent. She pointed out that other housing-related taxes such as stamp duty started small before being repeatedly heightened by revenue-seeking governments.