Mansion Tax to Cost Treasury £400m Before It Raises a Penny
A Freedom of Information request published this week shows Labour's High-Value Council Tax Surcharge will lose £215m in stamp duty and £65m in inheritance tax before it takes effect in 2028, plus £150m to value the homes in scope. Net revenue is now £930m, not £1.4bn.
In this article
Key Takeaways
- Treasury FoI figures show the High-Value Council Tax Surcharge will cost £380m before raising a penny, set against £1.4bn gross receipts over its first three years
- £215m of stamp duty revenue lost between announcement (Nov 2025) and start date (Apr 2028) as buyers retreat from the £2m boundary
- £65m of inheritance tax lost by 2030-31 as the surcharge depresses prices on in-scope properties
- £150m one-off cost for the Valuation Office Agency to identify and value the ~165,000 homes in scope
- Net Treasury benefit revised to £930m by 2031, not the £1.4bn headline figure used at announcement
- Treasury admits it carried out no analysis of VAT or corporation tax effects, so the true cost may be higher
- Industry warning: ~200,000 homes worth £1.5m to £2m may now defer renovations that would tip them over the threshold
- No new SDLT rate change in this announcement. The mansion tax remains a council-tax surcharge, not stamp duty, but the FoI reveals it is dragging on SDLT receipts
What the Treasury FoI Revealed
On 5 May 2026 The Telegraph and Estate Agent Today reported the contents of a Freedom of Information request, originally filed by The Times, that forced HM Treasury to disclose its own internal cost estimates for the High-Value Council Tax Surcharge. The figures land six months after Rachel Reeves announced the policy in the Autumn Budget on 26 November 2025, and three years before it is due to take effect in April 2028.
The headline number is stark. The Treasury expects to lose £230m in stamp duty and inheritance tax revenue between announcement and launch, and to spend a further £150m identifying and valuing the homes in scope. That is £380m of fiscal cost before the levy raises a single pound. Set against the £1.4bn headline revenue figure used at the Budget, the net Treasury benefit is now estimated at £930m by 2031.
For background on the policy itself, the bands, and how it sits alongside ATED and the 17% corporate SDLT rate, see our existing explainer: Mansion Tax: £2m+ Properties Face Annual Surcharge from 2028.
Important: The FoI does not announce a stamp duty rate change. SDLT rates and bands are unchanged. What it does reveal is that the mansion tax is already dragging on SDLT receipts because of buyer behaviour around the £2m threshold.
The £380m Cost: Line by Line
Treasury figures, as disclosed under the FoI and reported by The Times, The Telegraph and Estate Agent Today, break down as follows:
| Cost or revenue line | Amount | Period |
|---|---|---|
| Lost stamp duty (behavioural) | £215m | Nov 2025 to Apr 2028 |
| Lost inheritance tax | £65m | By 2030-31 |
| Combined SDLT + IHT loss | £230m | By 2030-31 |
| Valuation and identification | £150m | Pre-launch one-off |
| Total cost before launch | £380m | Cumulative |
| Gross surcharge revenue | £1.4bn | First 3 years (to 2031) |
| Net Treasury benefit | ~£930m | By 2031 |
Note on rounding: The Telegraph headline of "almost £400m" reflects the £380m line-item total, presented inclusive of the full IHT loss to 2030-31 and the £150m valuation cost. The £1.4bn figure is the OBR-scored gross revenue over three years; the net £930m is what reaches the Exchequer once the costs above are deducted.
Why £215m of Stamp Duty Disappears Before 2028
The £215m SDLT loss is what economists call a "behavioural effect". It does not come from a rate change; it comes from buyers and sellers altering their decisions in response to the announcement.
Three mechanisms drive it:
- Threshold avoidance: Buyers who would have purchased at £2.05m or £2.1m now pull back below the £2m line. Each retreat shaves SDLT off the Exchequer.
- Vendor pricing: Estate agents are already reporting properties listed at £1.95m to £1.99m to sit just under the threshold. Lower sale prices mean lower SDLT receipts.
- Transaction deferral: Some prospective £2m+ buyers postpone purchases entirely while they reassess the long-term cost of ownership.
These are the same dynamics observed at every SDLT threshold. For a worked picture of how thresholds shape transactions in practice, see our analysis in April 2025 Stamp Duty: One Year On, which tracks the 77,480 extra completions pulled forward by a different threshold change.
The Treasury appears to have priced this in: £215m lost over roughly 28 months between announcement and launch implies a steady drag of around £7-8m per month on SDLT receipts at the top of the market. It is a small fraction of total SDLT revenue (£13.9bn in 2024-25, see our SDLT receipts analysis), but a meaningful tax on the policy itself.
How the £65m Inheritance Tax Loss Builds Up
Inheritance tax (IHT) is charged at 40% on estates above the nil-rate band. Where high-value homes form the bulk of an estate, anything that depresses house prices around the £2m mark feeds straight through to lower IHT receipts on death.
The Treasury estimate of £65m by 2030-31 reflects the modelled fall in market values for homes near the threshold. Industry analysts have warned for months that the surcharge would create "cliff-edge" pricing pressure: the same effect that shows up in SDLT receipts shows up again, more slowly, in IHT.
Why two taxes both fall
A £2.1m home pulled back to £1.95m loses the Treasury once at the moment of sale (lower SDLT, because the price is lower) and again at the moment of inheritance (lower IHT, because the estate is smaller). The same behavioural change appears in both lines of the table.
The £150m Bill to Identify In-Scope Homes
Existing council tax bandings, set in 1991, are useless for a £2m threshold. The Valuation Office Agency (VOA) must therefore identify which homes are above £2m at 2026 prices and assign them to one of four bands. The Treasury has put a £150m price tag on that work.
The work is non-trivial. Period features, garages, planning permissions, and recent renovations all affect value, and the OBR estimates that 165,000 to 167,000 homes will be in scope across the policy's first three years. That is roughly £900 per home in identification cost alone, before any actual collection of revenue.
Because the VOA work runs ahead of launch, this £150m hits departmental budgets in the run-up to April 2028 and is not recouped until the policy is bringing in surcharge revenue.
165,000 Homes Affected Year One
The OBR projection accompanying the FoI shows the number of in-scope homes growing modestly across the first three years of the policy:
| Price band | Annual surcharge | 2028-29 | 2029-30 | 2030-31 |
|---|---|---|---|---|
| £2.0m to £2.5m | £2,500 | 71,000 | 72,000 | 72,000 |
| £2.5m to £3.5m | £3,500 | 54,000 | 55,000 | 55,000 |
| £3.5m to £5.0m | £5,000 | 25,000 | 25,000 | 25,000 |
| Over £5.0m | £7,500 | 15,000 | 15,000 | 15,000 |
| Total | 165,000 | 166,000 | 167,000 |
The slow growth (165k to 167k across three years) reflects the dampening effect on the top of the market. Without behavioural drag, more homes would tip into scope each year as house prices rose. The OBR is implicitly pricing in the same buyer caution that shows up as £215m of lost SDLT.
Net Revenue: £930m by 2031, Not £1.4bn
The £1.4bn figure repeated by the government in defence of the policy is the gross OBR-scored receipts from the surcharge over its first three years (to 2030-31). It does not include the £215m SDLT loss, the £65m IHT loss, or the £150m valuation bill.
Subtract those costs and the Treasury's own revised position, as confirmed by Estate Agent Today citing Treasury figures, is that the surcharge will produce a net £930m by 2031. That is roughly two-thirds of the headline figure used at the Autumn Budget.
Government response
A government spokesman, quoted by The Telegraph, said: "This tax is expected to raise around £1.4bn to help fund public services, including cutting the cost of living, by addressing the unfairness of a Band D home in Blackpool paying nearly £300 more in council tax than a £10 million Mayfair mansion. It is normal for there to be behavioural effects and upfront delivery costs when new taxes are introduced."
What the Treasury Did Not Analyse
The FoI also revealed gaps in the Treasury's costing model. According to the FoI response, the Treasury carried out no analysis of how the new surcharge would affect:
- VAT receipts: Lower transaction volumes at the top of the market reduce conveyancing fees, surveyor fees, and renovation spending, all of which carry VAT.
- Corporation tax receipts: Estate agents, solicitors, and developers earning less from prime-market activity pay less corporation tax.
Both omissions push in the same direction: the £380m cost figure is, on the Treasury's own admission, a floor, not a ceiling. The true fiscal cost before the policy raises a penny is plausibly higher.
The 200,000-Home Renovation Cliff
Building industry experts cited by The Telegraph have flagged a second-order effect that is harder to put a number on. Some 200,000 homes valued between £1.5m and £2m sit just below the surcharge threshold. Owners of those homes now face a sharp disincentive to extend or renovate in ways that would push their valuation over £2m, because doing so would trigger a recurring annual charge of at least £2,500.
If even a small fraction of those owners defer or cancel projects, the knock-on effect on construction activity, materials suppliers, and council planning fees adds further to the policy's economic cost, none of which is captured in the £380m figure.
The pattern echoes the threshold-bunching effects seen at every SDLT band. For our broader analysis of how thresholds reshape buyer behaviour, see Spring Statement 2026: No Stamp Duty Reform and our discussion of forestalling in April 2025: One Year On.
Frequently Asked Questions
Has stamp duty changed because of the mansion tax FoI?
No. Stamp Duty Land Tax rates and bands are unchanged. The High-Value Council Tax Surcharge is a separate, recurring annual tax on properties worth over £2 million from April 2028. What the FoI reveals is that buyer behaviour around the £2m threshold is already costing HMRC an estimated £215m in SDLT receipts before the surcharge takes effect.
Why does the Treasury lose stamp duty if the surcharge has not started?
Because announcement triggers behaviour, not just legislation. Estate agents report that vendors are already pricing properties just below £2m to keep buyers out of the surcharge zone. Lower sale prices mean lower SDLT bills, and some transactions are deferred altogether. The Treasury models this as a £215m drag on SDLT receipts between November 2025 and April 2028.
How much will the mansion tax actually raise?
The OBR-scored gross figure is £1.4bn over the first three years (to 2030-31). The Treasury's own net figure, after deducting £215m of lost SDLT, £65m of lost IHT, and £150m of valuation costs, is approximately £930m. The Treasury has not analysed VAT or corporation tax effects, so the net figure could be lower still.
How many homes are in scope?
OBR figures show 165,000 homes in 2028-29, rising to 167,000 by 2030-31. Of those, around 71,000 sit in the lowest band (£2.0m to £2.5m, paying £2,500 a year), while 15,000 sit in the top band (over £5m, paying £7,500). About 60% of in-scope homes are in London and the South East.
When does the mansion tax actually take effect?
The High-Value Council Tax Surcharge is scheduled to begin in April 2028. The Valuation Office Agency must identify and value all in-scope homes before that date, a piece of work the Treasury has costed at £150m. Until April 2028, no surcharge is paid, but the SDLT and IHT drag is already happening.
Will this stop the policy going ahead?
There is no indication of that. The government has reiterated its commitment to the policy and emphasised the £1.4bn gross revenue figure. The FoI does not change the legislative timetable. What it does change is the political context: the policy is now visibly more expensive to deliver than the Budget framing suggested, and the Autumn Budget 2026 may attract fresh scrutiny on whether the design is the right one.
Calculate Your Stamp Duty
Stamp duty rates have not changed. If you are buying at any price point, our calculator gives you the exact upfront SDLT bill including any second-home or non-resident surcharges. If you are buying at or near £2m, factor in the £2,500 to £7,500 annual surcharge from April 2028 alongside the upfront SDLT.
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Reviewed by
Emma Richardson, MRICS
Chartered Surveyor & Property Tax Specialist
Emma Richardson is a RICS-qualified Chartered Surveyor with over 12 years of experience in UK property taxation. She founded Calculate My Stamp Duty UK to help buyers understand the complex world of property transaction taxes.