Thousands of state pensioners across the UK could be forced to sell their family homes due to a significant change in council tax rules, with new annual charges set to reach as high as £7,500.
The New Council Tax Surcharge
The new financial pressure stems from council tax surcharges on higher-value properties, which are scheduled to come into force in April 2028. Specifically, these charges will target homes valued at more than £2 million.
Affected households will face annual bills ranging from £2,500 to £7,500. This policy, described by experts as a long-anticipated 'mansion tax', represents a major shift in how homes are taxed in the UK.
Regional Impact and Personal Hardship
Nick Neale, a Director at the property firm Emoov, highlighted the disproportionate effect on certain areas. "London and the South East are being penalised far more than the rest of the country," he stated.
He explained that many people who have lived in the same home for generations are now considering selling. They are often shocked to discover the equity they hold in their property, despite having very little disposable income to cover such a substantial new annual cost.
Neale added, "Keeping a large family home comes with maintenance, running costs and now considerable tax. Many families may feel they have little choice but to sell even when the intention was to pass the property on."
Broader Market Consequences
The implications of this tax change extend beyond individual hardship. Peter Stimson, Director of Mortgages at MPowered Mortgages, issued a stark warning about potential market distortions.
"For the first time ever, thousands of people have a perverse incentive to reduce the value of their homes and avoid trading up," he said. This suggests homeowners might deliberately undertake renovations or alterations that lower their property's official value to avoid the surcharge.
Glen Thomas, a partner at accountancy firm MHA, confirmed the scale of the shake-up. He also pointed to concerns that the move could depress the residential property market and unfairly impact those who bought their homes many years ago at much lower prices.
There are fears that individuals who are asset-rich but cash-poor will struggle to find the money for the new surcharge, particularly for homes valued in excess of £5 million.
Furthermore, the Office for Budget Responsibility (OBR) has expressed concern. While the measure is expected to raise £0.4 billion, the OBR worries it could lead to a reduction in revenue from other property taxes like Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT) due to changes in homeowner behaviour.
