How will Scotland build on mansion tax?

The High Value Council Tax Surcharge (aka the “mansion tax”) is an annual charge in addition to the Council Tax already paid to be imposed from April 2028. Divided into four separate bands, the lowest band (£2m to £2.5m) will pay an additional £2,500 annually and the highest (over £5m) paying £7,500 extra.

Fast forward to last month, and the Scottish government announced it will implement its own “mansion tax”. While conceptually similar, there are distinct differences between the plans for Scotland and England. The most obvious is that the threshold for paying this new tax is considerably lower; all properties with a value of £1m+ will be affected.

More subtly, there is a difference in the way the tax is being implemented. England has introduced a standalone tax, whereas Scotland will update the existing Council Tax system.

Scotland will complete a revaluation process of its most expensive homes with two new bands (I and J). Band I is to be for properties valued of £1-£2m and J for properties valued at over £2m.

A £5m budget has been allocated for the revaluation, in stark contrast to England where no large-scale physical property assessment is anticipated, with “desktop valuations” used.

It has not been confirmed how much extra the owners of affected properties in Scotland should expect to pay, although we do know councils will set the final rates. Given this gap in information, there is no estimate of additional revenue the Scottish government might expect to generate.

There are clear similarities between the two mansion taxes. Both schemes are set to be introduced in April 2028, both are attempting to tackle housing inequality, and both have come under much criticism.

While a majority appear to support the additional tax, the word “fairness” has been bandied about by others. An argument can be put forward that those in valuable homes are not necessarily the richest in society and this may put additional pressure on individuals desperate to try to keep a longstanding family home which was only a fraction of its current value when purchased. There is also the “London argument” which highlights that a fairly average family home in London may be assessed as over £2m in value whereas a genuine “mansion” in other parts of the country may not be affected.

The Scottish plans have been praised for taking the opportunity to complete a revaluation of properties for Council Tax purposes. However, it is also felt this doesn’t go far enough, with only higher value properties being assessed. In England there are concerns around the administrative burden from thousands of appeals which could be lodged, disputing desktop valuations. Neither government has said when or how revaluations should take place, while concerns have been raised that the tax is more about political principle than pennies in the public purse.

The Scottish mansion tax is estimated to affect fewer than 1 per cent of homes. Those purchasing a high value property should be aware of the additional cost and anyone with a property close to the £1m mark should think about rising property prices and if they may be affected in future. Only time will tell what the effects of the mansion tax will be on the Scottish housing market.

Ross Wallace is a Senior Solicitor, Wright, Johnston & Mackenzie LLP