A stark illustration of the Chancellor's new property levy has emerged, with a tiny London flat on the market for £2 million set to be branded a 'mansion' for tax purposes, while sprawling country estates escape the charge.
The 'Mansion' in Miniature
At the centre of this story is a modern two-bedroom flat, measuring less than 1,200 square feet, located in the trendy St Katherine Docks area of east London. The property, listed with Purplebricks, is housed in a converted warehouse featuring barrel-vaulted ceilings and exposed girders.
Beyond its eye-watering £2 million price tag, a buyer would face £200 per year in ground rent and a hefty £9,500 annual service charge. From April 2028, the owner will also be liable for Chancellor Rachel Reeves's new 'Mansion Tax', officially the High Value Council Tax Surcharge, adding another £2,500 every year.
How the New Property Levy Works
Announced in last week's Autumn Budget, the surcharge targets homes valued at £2 million or more, based on 2026 prices. For properties valued between £2 million and £2.5 million, the annual charge starts at £2,500. It can rise to as much as £7,500 per year for more expensive homes.
The tax is expected to hit London hardest, as the capital accounts for roughly 66 per cent of all homes sold above the £2 million threshold. A Daily Mail analysis shows wealthy central London neighbourhoods will be most affected:
- In Knightsbridge, Belgravia & Hyde Park, 63% of recent sales were £2m+.
- In Marylebone & Park Lane, the figure was 43%.
- In Wimbledon Common, it was 41%.
Conversely, in 90% of middle-layer population areas across the UK, not a single home sold for £2 million or more in the past year.
Market Reaction and Wider Ramifications
The government estimates the levy will raise £400 million for the Treasury, affecting around 100,000 properties via a revaluation of the top council tax bands (F, G and H). Homes in bands A to E will see no impact.
In response, online agent Purplebricks has launched a 'Mansion Package' to sell affected homes for a fixed fee of £2,499.50 on completion, half the price of their usual top-tier service. A spokesperson argued: 'Not every £2million property is a mansion and not every owner is super-rich. Just look at this flat.'
They criticised the policy as 'yet another kick in the teeth for Britain's fleeced homeowners', warning it comes on top of punitive stamp duties and could cause the market to stagnate, with ramifications spreading down to first-time buyers.
With an estimated 140,000 UK homes valued over £2 million, the debate over the fairness and economic impact of this new council tax surcharge is set to intensify as its 2028 implementation date approaches.
