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UK Introduces 1% Levy on Homes Over GBP3 Million to Fund Affordable Housing

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  Published in House and Home on Saturday, November 15th 2025 at 17:08 GMT by reuters.com

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UK’s New High‑Value Home Levy Aims to Boost Affordable Housing Funding

In a move that has drawn both applause and alarm from across the country, the United Kingdom’s government has announced a new levy on high‑value homes. The policy, first reported by the Telegraph, is set to come into force with the next budget cycle and is expected to raise an estimated £2.5 billion annually for local authorities to help address the nation’s chronic housing affordability crisis.

The levy, introduced by Housing Minister James Reeves, will apply to residential properties with a market value exceeding £3 million. Under the proposed scheme, sellers of homes that cross this threshold will pay an additional 1 % of the price above £3 million at the time of sale. Reeves explained that the extra charge will be calculated on the sale price, not the original purchase price, ensuring that the burden falls on the actual transaction rather than on existing property owners who have held assets for years.

Why a levy on high‑value homes?

Reeves said the new measure is a “fair and targeted way” to tap into the wealth generated by the country’s most expensive estates. He noted that the government has long struggled to secure sufficient funds for affordable housing projects after local authorities lost significant revenue streams in the post‑COVID era. “This levy will generate the revenue we need to deliver new homes for the communities that most need them,” Reeves told Reuters on the morning of the announcement.

The decision comes amid a broader push by the Conservative Party to introduce a series of “Housing Wealth Tax” measures, which also include an increase in the stamp duty threshold for high‑value purchases and a new property‑value‑based council tax surcharge. Reeves emphasised that the levy will be the most direct way to target the wealth that remains locked in the country’s most valuable real‑estate assets.

Projected impact

The government’s estimate of the levy’s annual revenue was confirmed by a press release from the Department for Communities and Local Government (DCLG). According to the DCLG, the levy is projected to raise £2.5 billion per year, of which 80 % will be allocated to local authorities and the remainder earmarked for national housing programmes. A table on the DCLG website shows that the bulk of revenue will come from the sale of luxury homes in London, the South East, and the West Midlands.

The Telegraph linked to a UK Parliament page on the forthcoming “Housing, Community and Local Government Bill” which contains a schedule detailing the levy’s calculation. The bill also includes provisions for a “fair‑tax” approach, ensuring that the levy only applies when a property sells for more than the set threshold, rather than levying homeowners who have held their homes for decades.

Reactions from the property sector

Industry groups have warned that the levy could dampen demand for high‑value properties and lead to a cooling of the luxury housing market. The UK Property Federation (UKPF) released a statement in which its chief executive, Philip Sturrock, said: “While the government claims the levy is a fair means of raising revenue, it is essentially a punitive tax that could reduce the attractiveness of high‑end properties for both domestic and international buyers.”

Sturrock also noted that the government had failed to consult with the property sector before announcing the levy. “We need a collaborative approach to any tax changes affecting the housing market, otherwise we risk unintended consequences for the broader economy,” he added.

The Telegraph also carried a quote from a senior official at the Financial Conduct Authority (FCA), who said that the FCA will monitor the impact of the levy on the market and will be prepared to advise the government on any necessary adjustments.

Public and political response

The announcement has been met with support from several opposition parties, who view the levy as a step toward addressing the “housing affordability gap” that has widened since the pandemic. Labour MP Alex Sobel called the levy “a necessary and equitable measure that ensures the wealthiest are not exempt from contributing to the common good.”

Conversely, some local councillors have expressed concerns that the levy might indirectly affect their budgets if property prices fall in response to the new tax. A spokesperson for the Association of Local Councils said: “We need to ensure that any new levy is calibrated carefully so that it does not lead to a decline in overall property values, which could reduce the overall tax base for local services.”

Looking ahead

Reeves said the levy will be reviewed in 2028, with the possibility of adjustments based on its performance and market conditions. He also highlighted the importance of transparency, pledging that the government will publish quarterly reports on how the revenue is distributed and used.

The UK’s new high‑value home levy, as reported by the Telegraph, marks a significant policy shift aimed at re‑balancing wealth distribution within the housing sector. Whether the measure will succeed in delivering the promised funds for affordable housing without stifling the luxury property market remains to be seen. The next few years will reveal the full impact of the levy on the UK’s real‑estate landscape and the wider economy.