Scotland's government has followed Westminster's lead by introducing a new levy on the country's most expensive homes, dubbed a 'mansion tax'. Finance Secretary Shona Robison used her Budget statement to announce the creation of two new council tax bands, set to take effect from April 2028.
Details of the New Property Levy
The new policy will see Band I applied to properties valued between £1 million and £2 million, while Band J will cover all homes worth over £2 million. The Scottish Government estimates the changes will affect approximately 11,000 properties, representing less than 1 per cent of the total housing market.
This move shadows Chancellor Rachel Reeves's recent announcement of an annual surcharge on £2 million homes in England, ranging from £2,500 to £7,500, also commencing in 2028. Ms Robison stated the targeted revaluation for the new bands would leave the majority of properties unchanged, aiming to raise around £16 million a year in additional revenue for local councils.
Broader Council Tax Pressures and Criticism
Despite the new bands, the measure will generate only a fraction of the £3 billion brought in by the existing council tax system. The announcement comes amid significant financial strain on local authorities. For the second consecutive year, councils have been given free rein to set their own rates, which last year resulted in an average hike of 9.6 per cent.
A survey by the Local Government Information Unit found that all 26 of the responding Scottish councils plan to raise council tax and cut spending in 2026/27 to balance their books. Cosla, the council umbrella body, argues authorities need at least £16 billion to maintain services but received a settlement of less than £15.7 billion.
Expert Analysis and Political Reaction
Financial experts have questioned the efficacy and potential side-effects of the policy. Stephen Cotter of Rathbones warned it could "distort activity at the top end of the market," creating price cliffs at the valuation thresholds and potentially slowing transactions and renovations, which might reduce overall tax revenue.
Charlene Young of AJ Bell suggested the policy was "more about the message and optics" than raising substantial revenue. Meanwhile, Chris Barber from the Institute of Chartered Accountants Scotland noted the announcement pre-empts a full council tax review, limiting proper scrutiny.
Scottish Green co-leader Ross Greer claimed credit for the mansion tax and other progressive measures in the budget, stating it was right for the "super-rich" to contribute more. Council leaders are set to discuss the Budget proposals at a special meeting, with Cosla emphasising the need for local authorities to be involved in shaping the policy.
