Propertymark warns Scottish Government mansion tax could hinder housing market mobility

Propertymark is calling on the Scottish Government to take a wider approach to property taxation rather than introducing two new council tax bands for high-value homes, warning that the proposals could add complexity, create valuation challenges and further restrict movement in the housing market.

Responding to the Scottish Government’s consultation on Council Tax High-Value Property Bands, Propertymark said reform of council tax should not be considered in isolation from wider changes to property taxation and the housing market.

The proposals would introduce two new council tax bands for properties valued at more than £1 million and £2 million. Illustrative figures suggest properties in the new Band I could pay around £4,770 a year, while Band J properties could face an annual charge of around £7,650.

Propertymark believes the Scottish Government should instead take a coordinated approach to tax policy, including reviewing the impact of existing taxes on the housing market.

Hazel MacIver, Policy and Campaigns Officer at Propertymark, said:

“Property taxation has a direct impact on people’s ability to move home. If the Scottish Government wants to improve housing-market activity, it needs to look at the tax system as a whole rather than introducing another layer of taxation onto an already complex system.

“Adding two council tax bands to a system that is still based on property values from 1991 risks being little more than tinkering with a system that is in need of fundamental reform.”

Propertymark points to the scale of the proposals, with the Scottish Government estimating that around 15,000 properties out of approximately 2.7 million residential properties in Scotland would fall into the two new bands. The additional revenue is estimated at £12 million–£16 million, before administration costs, appeals and potential deferrals are taken into account.

Valuing Scotland’s most expensive homes will be challenging

Propertymark is particularly concerned about how properties worth more than £1 million would be identified and valued.

High-value properties can be more difficult to assess because they are more diverse, transactions are less frequent, and many may not have changed hands for decades.

Propertymark also warns that automated valuation methods may be less reliable at the top end of the market.

The organisation says accurate assessments could require on-site inspections to establish the condition of a property and identify modifications that could affect its value. It also questions whether there will be enough qualified valuers to undertake the work, particularly in rural areas.

With council tax currently based on 1991 property values, Propertymark argues that introducing a targeted valuation exercise for properties worth £1 million or more, while leaving the wider system unreformed, could create further inconsistencies.

Hazel continued:

“Valuing a £1 million-plus property is not always straightforward. These homes can be unique, may not have been sold for decades and can differ significantly from one another.

“The Scottish Government must have confidence that valuations are accurate and that there are sufficient qualified assessors to carry out the work. Otherwise, we risk a significant increase in appeals, delays and uncertainty for homeowners.”

Propertymark also warns that the proposed thresholds could create “cliff edges” between bands, potentially encouraging owners to challenge valuations and, in some cases, discouraging investment in home improvements.

Risk to older homeowners and housing-market movement

Propertymark has also highlighted the potential impact on older homeowners whose properties have increased significantly in value but whose incomes have not kept pace.

Such homeowners may be asset rich but cash poor, making it difficult to meet a substantial increase in council tax. Propertymark warns that some could seek to defer payments, while others could face additional barriers to moving or rightsizing because of the wider tax burden associated with selling and buying a property.

Propertymark believes the Scottish Government should consider measures that support housing-market activity, including reviewing rates of Land and Buildings Transaction Tax (LBTT) and the Additional Dwelling Supplement.

According to Propertymark member Rettie, around 500 £1 million-plus property sales in Scotland last year generated approximately £65 million in LBTT revenue, representing around 9% of total LBTT revenue from just 0.5% of sales.

Regional impact must be considered

Propertymark is also calling for greater consideration of the geographical impact of the proposals.

High-value properties are not evenly distributed across Scotland, with Edinburgh and certain rural areas expected to be particularly affected. Propertymark says the Scottish Government must clarify how additional revenue will be distributed and ensure a clear link between council tax paid and the local services it funds.

The organisation is urging the Scottish Government to engage further with property professionals before proceeding, including ensuring that sufficient assessors are available to deliver accurate valuations.

Hazel concluded:

“The Scottish Government has an opportunity to look at property taxation strategically and consider how it can support people to move into the right homes, improve housing quality and stimulate economic activity.

“We are asking the Scottish Government to engage further with the property sector and to consider these proposals alongside wider council tax reform and revaluation, rather than adding further complexity to a system that already needs fundamental reform.”