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Developers to Pay Mansion Tax on Unsold Luxury Properties
Property developers will be required to pay Labour’s new mansion tax if newly built luxury homes remain unsold for more than a year, according to a Treasury consultation document reported by City AM. The measure applies to homes valued above £2 million and is set to come into force in 2028.
Under the proposed rules, developers will be liable for the full mansion tax if a property is not sold within 12 months of completion. Before the 12-month mark, developers could face a discounted bill as soon as a completion notice is issued, depending on decisions by local authorities.
The mansion tax, announced by Rachel Reeves at last year’s Budget, will apply to the top one per cent of the UK’s most valuable homes. The basic rate is £2,500 per year for homes worth between £2 million and £2.5 million, with higher rates for more expensive properties, up to £7,000 annually for homes valued above £5 million.
Estate agents have reported that transactions for homes above £2 million have dropped since the tax was announced, and more properties are being listed just below the threshold. The liability for developers is raising concerns about the viability of new luxury developments, particularly in London, where most high-value new builds are located.
The government is also considering an additional ‘oligarch premium’ for non-UK resident homeowners, but no decision has been made on this proposal.
The tax is expected to generate around £430 million a year for the Exchequer, but the process of valuing eligible homes is estimated to cost nearly £400 million.
Source: City AM