Could the UK introduce a ‘mansion tax’?
- TBA
- Oct 7
- 3 min read
The UK Chancellor, Rachel Reeves, has confirmed that the next Autumn Statement will be delivered on 26 November. It is expected to include a series of potential tax adjustments and fiscal reforms.
Given that inflation has remained high in recent months and the UK economy has shown weak data, many analysts believe Reeves may avoid raising taxes directly on ‘working people’, such as VAT, income tax, and National Insurance contributions. Instead, the government may target bank and property taxes, indirectly affecting individuals and businesses.
According to sources, the Treasury is considering a new tax on properties worth more than £500,000, which could be formally announced in the Autumn Statement.
Treasury considers proportional property tax
At present, stamp duty is payable on any property purchase above £125,000. First-time buyers enjoy a relief, with the threshold raised to £300,000. However, this relief does not apply to homes over £500,000, where buyers must pay the standard rates.
It is understood that the Treasury is exploring a ‘proportional property tax’, aimed at owner-occupied homes sold for more than £500,000.
The tax would be linked to the property’s value and collected directly by HMRC.
Key points under consideration include:
The tax would not replace stamp duty on second homes
It would be payable when the owner sells the property
In the medium to long term, it could gradually replace stamp duty, and potentially even Council Tax
If approved, the measures could be introduced during the current Parliament.
Current stamp duty rules
Stamp duty land tax (SDLT) is payable by buyers when purchasing property in the UK. For a main residence, the basic rates apply (with a first-time buyer relief threshold of £300,000).
For second homes, individuals and companies must pay an additional 5% surcharge on top of the standard SDLT rates.
In addition, companies buying residential properties worth more than £500,000 (not for genuine property business purposes) face a higher SDLT rate of 17%.
In other words, even if the proposed ‘proportional property tax’ is not introduced, buyers could still see higher bills due to existing surcharges.
Buying property through a company
With property tax costs rising in recent years, some buyers have turned to company structures—such as special purpose vehicle (SPV) companies—to purchase property, particularly for buy-to-let purposes.
This practice is often referred to as ‘incorporation’.
But does buying through a company really save tax?
The rules are clear: all company purchases attract a 3% SDLT surcharge on top of the standard rate, regardless of whether the property is the company’s first. This applies equally to SPVs, which exist solely to hold property.
Moreover, SPV-owned residential properties worth over £500,000 may be subject to the Annual Tax on Enveloped Dwellings (ATED).
That said, there are circumstances where reliefs may apply:
Multiple Dwellings Relief (MDR): where multiple units (e.g. flats, HMOs) are purchased together, the tax may be calculated on the average unit price, reducing the overall bill
Mixed-use Properties: if part of the property is used commercially (e.g. a shop with a flat above), the lower non-residential rates may apply, and the 3% surcharge avoided
Development or rental exemptions: developers, landlords, or certain categories such as farmhouses may qualify for reduced or exempt SDLT
Market outlook
Besides from the details of stamp duty and potential new taxes, it is also vital to keep an eye on the wider UK property market.
According to data from Nationwide, by August 2025 the annual rate of house price growth had slowed to 2.1%.
Compared with July, average house prices fell slightly by 0.1%, standing at £271,079. Although growth has cooled, prices remain historically high, leaving affordability pressures unchanged.
Against this backdrop, property tax reform could become a key step for the Treasury in tackling both housing affordability and the strain on local government finances.
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