London’s luxury developers are in for a fresh blow if another proposed ‘developer mansion tax’ – included in a Treasury consultation document – is passed.
The UK Labour government is considering making luxury housing developers liable to pay a new kind of mansion tax if high-end new homes take more than a year to sell.
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In what has been one of the most significant changes to the UK housing market for decades, an annual Council Tax surcharge on homes valued above £2 million has already been introduced via the Autumn Budget Statement of 2025.
The tax will be dependent on a property’s market value in 2026, as assessed by the Valuation Office Agency (VOA).
High-value homeowners will be liable to pay annual charges of £2,500–£7,500 depending on the value band, with the Treasury collecting the tax starting in 2028.
The annual surcharge is levied in four bands:
- An additional £2,500 per annum on properties over £2 million
- £3,500 on those over £2.5 million
- £5,000 over £3.5 million
- £7,500 on properties over £5 million.
While the levy will affect less than 1% of total residences across the country, the highest concentration of luxury homes falling within the taxable bracket is in London.
The tax may also apply to high-value units that have been unsold after a period of one year, with developers shouldering the tax burden on empty luxury homes with the rate based on the unit’s allocated value band.
Before the one-year grace period, home builders could be forced to shoulder a discounted bill as soon as “a completion notice” is issued, subject to a ruling from the relevant local authorities.
Such a disincentive is viewed as punitive by developers and risks suppressing the appetite among buyers and sellers at the UK’s top end, ultimately constraining supply in an already tightly squeezed luxury market.
Is an ‘oligarch tax’ on homes £2m+ going to be introduced?
As part of the same consultation, the government is also exploring an additional ‘oligarch premium’ on top of the standard mansion tax that would force non-UK resident homeowners to pay a higher surcharge on ‘buy-to-leave’ and main residence London trophy homes.
First reported in the Financial Times, government officials confirmed the idea of a “non-resident premium” is under consideration – a move which could see the UK’s remaining ultra-high-net-worth foreign residents and overseas investors decamp wholesale to friendlier global wealth hubs, such as Milan in Italy, or Zug in Switzerland.
In 2025, the United Kingdom faced the largest single-year exodus of wealth ever recorded, with 16,500 of the country’s richest seeking residency overseas.
A regulatory albatross around developers’ necks
Factoring in high construction and labour costs, empty new-build homes will become an albatross around developers’ necks and a weighty drag chute when testing project viability in an increasingly costly and tax-heavy new home landscape.
Although a drop in the ocean for some of the capital’s ultra-rich, the new tax has been met with frustration; estate agents have said the tax is already distorting the market, with transactions above £2 million falling sharply since the new levy was announced.
Jo Eccles, Founder and Managing Director of London buying agency, Eccord told The Super Prime that the measure is likely to create a cliff edge at the £2 million mark and would effectively freeze the market just above it.
“The continued pursuit of those with wealth is deeply damaging and counterproductive. It doesn’t just impact the ultra-wealthy who are highly mobile and now have another reason to move elsewhere, at a significant loss to the UK economy.
“With the threshold set at £2 million, this measure directly impacts London’s upper-middle classes – who are typically households with mortgages and finite resources,” Eccles said.
The mansion tax is expected to raise £430 million annually from 2028 to help plug fiscal gaps within the broader economy, with the additional unsold new home levy adding to government coffers if voted in.
