Mansion tax risks pushing London families out of inherited homes

New concerns have emerged that thousands of London homeowners could be pushed to sell long-held family properties under the Government’s proposed “mansion tax”, with older residents and inherited homes expected to be hit hardest.

The tax, which applies to properties valued above £2 million, is set to come into force in April 2028.

London and the South East, where house prices far outstrip the national average, are expected to bear the brunt.

Costs are estimated at £2,500 to £7,500 per month, raising fears that long-established London families may be forced to downsize for financial reasons rather than choice.

Inheritance concerns as families face rising costs

Property expert Nick Neale, Director at Emoov, warns that many owners are “equity rich but cash poor”, describing a growing pattern of families selling properties that have been passed down for decades.

“London and the South East are being penalised far more than the rest of the country. People who’ve lived in the same home for generations are suddenly looking to sell, often shocked to realise the equity they’re sitting on, despite having little disposable income,” Nick explains.

He added that the tax could disrupt inheritance and multigenerational property planning.

“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.”

No downsizing options for older Londoners

Neale highlights a shortage of suitable homes for older Londoners wanting to move somewhere smaller.

“We simply aren’t building enough bungalows or accessible properties. In the 1960s, there was real supply; today, the market offers almost nothing. Homeowners are trapped between rising taxes and nowhere appropriate to go.”

This lack of alternative housing, he argues, could create a bottleneck across the capital; larger homes aren’t freed up, yet homeowners cannot afford to stay put.

Mansion Tax Survival Guide: How London homeowners can prepare

• Get an Independent Valuation
  Know exactly where your property sits — don’t risk being over-assessed.

• Explore Downsizing Early
  Smaller homes or relocation outside high-tax zones could free cash and cut pressure.

• Release Equity if Needed
  Equity release or remortgaging may help if the home holds value but income is tight.

• Protect Future Inheritance
  Estate planning, wills and trusts can safeguard wealth and ease transfer to family.

• Bring Running Costs Down
  Energy upgrades and maintenance can offset outgoings and extend affordability.

• Track Policy Updates
  Tax rules evolve — staying informed gives homeowners more room to manoeuvre.

• Seek Specialist Advice
  Financial, tax and property experts can build strategies tailored to each situation.

Nick concludes, “This policy represents a major shift for London homeowners. For many, the decision to stay, sell or downsize will soon be driven not by lifestyle but by affordability. Planning is crucial, as well as creating more downsizing options for older generations.”