Labour’s proposed mansion tax could push many pensioners to sell their homes, according to new analysis. The plan, expected to be outlined by Chancellor Rachel Reeves in the November Budget, may impose a 1% annual levy on properties worth over £2 million. While the measure aims to raise much-needed revenue, property experts warn it could disproportionately affect retirees who are asset-rich but cash-poor.
For pensioners whose property values have risen over decades, the tax could mean an additional £10,000 bill each year for homes valued at around £3 million. Many of these homeowners, particularly in London and the South East, where over 80% of £2m+ properties are located, could be forced to downsize simply to meet the tax burden.
Tom Bill of Knight Frank expressed concern that long-term homeowners may not have the liquidity to pay such a levy. “It doesn’t follow that owning a valuable home means having the cash to cover this tax,” he explained, noting that many elderly owners have lived in their homes for decades as values appreciated around them.
Data from Savills indicates there are about 140,000 properties in the UK worth £2 million or more, with nearly a quarter owned for over 20 years. Meanwhile, the ONS reports that almost one in five homeowners with significant property wealth — valued above £500,000 — are over 65, underscoring how the policy would hit older generations hardest.
Lucian Cook of Savills added that many of those affected would be long-term residents unprepared for sudden, recurring tax bills of thousands of pounds each year. He also emphasised that London and South East homeowners would bear the brunt of the change due to high property values in the region.
Rachel Reeves faces growing pressure to address a reported £50 billion gap in the nation’s finances. The proposed mansion tax is one of several measures being considered to increase government revenue, alongside possible spending cuts and other tax adjustments.
However, the proposal has sparked emotional and financial concern among retirees. Sarah Coles of Hargreaves Lansdown warned that even the discussion of such a tax could be distressing. “People’s homes represent their sense of safety. For those in their 70s or 80s, being told to move can be incredibly upsetting,” she said.
The concept of a mansion tax isn’t new. It was first introduced by Vince Cable in 2009 and later adopted by Labour under Ed Miliband. Yet critics, including former Bank of England governor Mervyn King, argue that adding another wealth-based tax would only complicate the UK’s already intricate tax system.
Market reactions have been swift. Property experts report that both buyers and sellers are becoming hesitant, with some sales being paused or cancelled entirely in anticipation of the Budget announcement on 26 November. Sellers are also lowering asking prices in an effort to complete transactions before potential new taxes take effect.
This uncertainty has led to the first decline in annual agreed home sales in two years. Meanwhile, property-related stocks dropped on the London Stock Exchange following news of the proposed tax.
A Treasury spokesperson declined to confirm the plans, stating only that “the Chancellor makes tax policy decisions at fiscal events” and that they would not comment on speculation.
If implemented, the mansion tax could reshape the property landscape, particularly for older homeowners whose long-held assets have become the source of unexpected financial strain. Many now await the November Budget with growing anxiety over whether their family homes will remain affordable to keep.
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