Thousands of cash-poor pensioners could be trapped in a mounting debt spiral under Labour’s new property tax plans, personal finance experts warn. The proposed “mansion tax” – officially branded as a high-value council tax surcharge – would impose an annual charge on homes valued at £2 million or more, beginning in April 2028.
Affected families may face extra bills ranging from £2,500 to as much as £7,500 each year. For older homeowners who have significant property assets but limited cash on hand, this levy poses a serious financial risk. Those unable to pay immediately might have to defer the levy, only to be hit with interest rates reportedly as high as 8%, making the cost escalate sharply over time.
Accounting expert Heather Powell of Blick Rothenberg cautions, “If this deferral rolls on for ten years, that’s going to be really expensive.” She notes that an 8% interest rate on deferred payments could deter many from postponing the levy but leave them struggling to pay outright.
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Former pensions minister Ros Altmann adds, “A deferral system could become a lucrative revenue source for the Treasury but a devastating burden for older homeowners who find selling difficult and lack liquid funds to cover the tax.”
The government plans a consultation early next year and has promised a support scheme for low-income individuals. Officials are reportedly reviewing the deferral system to ensure bills can be settled in a single payment when a property is sold or upon the homeowner’s death.