Introduction to the Mansion Tax

New concerns have emerged that thousands of London homeowners could be pushed to sell long-held family properties under the Government’s proposed “mansion tax”, with older residents and inherited homes expected to be hit hardest.

The tax, which applies to properties valued above £2 million, is set to come into force in April 2028.

London and the South East, where house prices far outstrip the national average, are expected to bear the brunt.

Costs are estimated at £2,500 to £7,500 per month, raising fears that long-established London families may be forced to downsize for financial reasons rather than choice.

Understanding the Impact of the Mansion Tax

Inheritance Concerns as Families Face Rising Costs

Property expert Nick Neale, Director at Emoov, warns that many owners are “equity rich but cash poor”, describing a growing pattern of families selling properties that have been passed down for decades.

“London and the South East are being penalised far more than the rest of the country. People who’ve lived in the same home for generations are suddenly looking to sell, often shocked to realise the equity they’re sitting on, despite having little disposable income,” Nick explains.

He added that the tax could disrupt inheritance and multigenerational property planning.

“Keeping a large family home comes with maintenance, running costs and now considerable tax. Many families may feel they have little choice but to sell even when the intention was to pass the property on.”

No Downsizing Options for Older Londoners

Neale highlights a shortage of suitable homes for older Londoners wanting to move somewhere smaller.

“We simply aren’t building enough bungalows or accessible properties. In the 1960s, there was real supply; today, the market offers almost nothing. Homeowners are trapped between rising taxes and nowhere appropriate to go.”

This lack of alternative housing, he argues, could create a bottleneck across the capital; larger homes aren’t freed up, yet homeowners cannot afford to stay put.

Preparing for the Mansion Tax

Mansion Tax Survival Guide: How London Homeowners Can Prepare

• Get an Independent Valuation
  Know exactly where your property sits — don’t risk being over-assessed.

• Explore Downsizing Early
  Smaller homes or relocation outside high-tax zones could free cash and cut pressure.

• Release Equity if Needed
  Equity release or remortgaging may help if the home holds value but income is tight.

• Protect Future Inheritance
  Estate planning, wills and trusts can safeguard wealth and ease transfer to family.

• Bring Running Costs Down
  Energy upgrades and maintenance can offset outgoings and extend affordability.

• Track Policy Updates
  Tax rules evolve — staying informed gives homeowners more room to manoeuvre.

• Seek Specialist Advice
  Financial, tax and property experts can build strategies tailored to each situation.

Nick concludes, “This policy represents a major shift for London homeowners. For many, the decision to stay, sell or downsize will soon be driven not by lifestyle but by affordability. Planning is crucial, as well as creating more downsizing options for older generations.”

Conclusion

The proposed mansion tax is set to have a significant impact on London homeowners, particularly those with properties valued above £2 million. With costs estimated to range from £2,500 to £7,500 per month, many families may be forced to downsize or sell their homes due to financial constraints. It is essential for homeowners to understand the implications of the tax and take proactive steps to prepare, including seeking independent valuations, exploring downsizing options, and protecting future inheritance. By doing so, they can navigate the challenges posed by the mansion tax and make informed decisions about their properties.

Frequently Asked Questions

Q: What is the mansion tax, and how does it work?

A: The mansion tax is a proposed tax on properties valued above £2 million, set to come into force in April 2028. The tax will be applied to properties in London and the South East, where house prices are significantly higher than the national average.

Q: How much will the mansion tax cost homeowners?

A: The costs of the mansion tax are estimated to range from £2,500 to £7,500 per month, depending on the value of the property.

Q: Who will be most affected by the mansion tax?

A: Older residents and inherited homes are expected to be hit hardest by the mansion tax, as they may be forced to downsize or sell their properties due to financial constraints.

Q: What can homeowners do to prepare for the mansion tax?

A: Homeowners can prepare for the mansion tax by seeking independent valuations, exploring downsizing options, releasing equity if needed, protecting future inheritance, bringing running costs down, tracking policy updates, and seeking specialist advice.

Q: Why is there a shortage of downsizing options for older Londoners?

A: There is a shortage of suitable homes for older Londoners wanting to move somewhere smaller, as there are not enough bungalows or accessible properties being built. This lack of alternative housing can create a bottleneck across the capital, making it difficult for homeowners to downsize or sell their properties.