The following is a copy of the consultation response to the Scottish Council Tax High-Value Property Bands (Mansion Tax) consultation process. Views expressed are my own only (Professor Ken Gibb).
The New Tax
The Scottish Government is emulating the UK Government 2025 budget decision to introduce (in 2028) a council tax high property value surcharge, known colloquially as a ‘mansion tax’. In Scotland, this will be levied as additional sums charged at a flat rate for each of two additional bands.
In the consultation, properties with an estimated value (as of April 1, 2026) of more than £1m up to £2m would go in to the new band I and be charged annually an additional £720 (approximately) as well as the standard band H. Properties worth more than £2m would go into new band J and an additional charge would be levied of around £3,600. The Scottish government estimates that there are around 15,000 such homes liable for the new charge (and around half of them are in Edinburgh) and they will be the subject of a specific revaluation just for high value properties.
Differences from the UK proposal
Scotland will depart from the UK initiative in four important respects.
- The high value surcharge bands start at £1m in Scotland whereas they start at £2m in the UK proposal.
- The UK model proposes to return the surcharge revenue to HM Treasury as a UK tax, whereas the Scottish consultation now says that the revenue will remain local and stick to the council area it was raised in.
- The UK model explicitly says that they will revalue for these purposes all properties above £1.5m (i.e. they widen the revaluation considerably at the low end below their £2m threshold). This is not discussed in the Scottish consultation other than to repeat the mantra that the surcharge proposals are separate from the wider council tax reform consultation which completed earlier in the year before the Scottish election.
- John Muellbauer, writing in January for the Financial Times, suggested that the UK government are likely to introduce a payment deferral scheme for the new tax. In Scotland, the consultation notes the wider council tax consultation, which does discuss reform transitional arrangements, deferral schemes and adapting the rebate scheme known as the council tax reduction scheme. But these options are not part of the new tax consultation: ‘such protections….will be informed by the responses and conclusions from that wider work’ (p.10).
Reflections on the new tax proposal
Calls for a wealth tax reflects concerns about the growing focus on wealth inequality. It is also a recognition that there is an assets flow into more lightly taxed activities and that at some point governments as revenue users need to do something about tax revenue loss from traditional sources in the face of rising demands.
Soaita, et al, 2019, stress the much greater inequality in Scotland of wealth relative to income especially in terms of property, financial and private pension wealth. More recent data from the National Records for Scotland website for the period 2022-22, subject to data collection challenges arising during Covid, suggest that the Gini-coefficient of property wealth inequality at 0.66 was double that of the income inequality for 2021-24 (before housing costs). So, there appears to be a prima facie case for a wealth tax levied on housing assets. Moreover, UK (and Scottish) housing taxation is well known to lightly tax home ownership assets.
In our 2019 evidence review we focused on the housing wealth tax policy proposals from the benchmark review of UK taxation, the 2011 IFS Mirrlees review, Tax by Design, as well as the final book by the leading economist of inequality, Tony Atkinson. Tax by Design argued for a land value tax but in its (likely) absence, proposed a tax on home owners and landlords on earnings above normal rates of return. They also proposed a housing consumption tax for all households. They also proposed abolition of stamp duty on house purchase and the replacement inheritance tax with a wealth transfer tax which would tax receipts as wealth transfers occur. Atkinson supported this latter measure but also proposed an annual wealth tax and the reform of home ownership taxation and the council tax (he proposed a proportionate property tax, something widely discussed in the last 5 or so years – see below). Might we then consider the ‘mansion tax’ to be a first step to addressing housing wealth inequality or might it be, if we are less ambitious, the final step?
Muellbauer argues that the fixed payments are a poor tax design feature and argues instead for a proportionate property tax and a surplus proportion added for the high value surcharge element i.e. people in properties beyond the threshold would pay an additional X% with the bill depending on the product of the tax rate chosen and the estimated current capital value of their property.
There are two further difficulties with the design of the revaluation suggested for the new tax. The most obvious is the determination of both governments to keep the mansion tax separate from any wider discussion of council tax revaluation. Particularly in Scotland this verges on the ridiculous. We noted above the reference to the IFS analysis of mitigations for the Scottish council tax revaluation. But it makes no sense to contemplate revaluing (to current prices) just the top 1% and leaving the rest of the tax base stuck in 1991. Surely, they both need to be done together?
The second issue concerns the top 1%: how wide in value terms does the revaluation have to cover? For instance, we saw that in England they will revalue all properties worth up to £500,000 less than the threshold. Equally, how will the uprating of property values operate in terms of maintaining an accurate tax base for those who are above the threshold? Will there be some form of annual indexing (and if so which index?) and will there be regular periodic revaluations for the top 1%? As with all good property taxes, this issue of future correct valuation should not be ducked.
On the other hand, we should welcome the Scottish decision to keep the revenues local. This is the right thing to do.
We cannot sustain holding the mansion tax proposals separately from council tax reform and revaluation. As was identified above, in recent times we have seen a significant increase in proposals for council tax reform (see references for details). These are discussed in detail in my new book (Gibb, forthcoming). What is striking is that each is similar in approach and outlook though different in details and some specifics. They support a proportionate property tax usually levied on property owners rather than households. A general revaluation is combined with a commitment to regular future revaluation. A locally levied percentage on current property value would replace council tax but is usually augmented by a national tax, also a proportionate property tax, which would raise revenue from all owners to replace the now abolished stamp duty/LBTT which had been levied on purchasers only. These proposals tend to include all or some of the three mitigation measures suggested above by IFS.
My own view is also in tune with the proportionate property tax proposal but differs in that I consider that local government finance requires a household property tax because tenants must contribute; but they should be exempt from the stamp duty replacement element. I would tax housing consumption by tenants and split the local property tax element levied on the PRS so that landlords pay the tax minus the housing consumption element paid by tenants. Social tenants would pay tax based on social rents not market values.
Opponents of reform often say that reform is politically non-credible because of the numbers of losers and potential fear of loss among the general voting public. The memory of the poll tax experience loom large. But is the primeval reluctance really true? We found the opposite when we conducted a rigorous citizen panel in Glasgow about council tax reform. There was willingness to contemplate revaluation and reform provided it was fair, local services improved, and there was a wide educational effort to communicate the system as it is and the choices in front of us. Might clear lessons from such deliberative democracy exercises permit politicians and their advisors to move progressively? Might a successful ‘mansion tax’ and debate around it do something similar?
Key messages
- Move from a flat rate to a % of property value as suggested by Muellbauer.
- Combine the 1% top value revaluation with a general council tax revaluation and prepare the ground for a proportionate property tax approach.
- Lay out plans for future indexing/revaluation beyond the current period.
- Introduce deferral payment arrangements, transitional arrangements to dampen initial losses and revisit the overall national rebate scheme.
- Before undertaking any reforms commit to deliberative democracy citizen assembly objective exercises to see what an informed but disinterested public would actually like to do in terms of council tax reform once they are fully au fait with how the present system operates (this would build on lessons from Ireland on deliberative democracy and Gibb and Leishman, 2025).
References
Cheshire, P and Hilbert, C (2021) Homes Truths: Options for Reforming Residential Property Taxes in England. Bright Blue: London.
Fairer Share (2021) Fairer Share Manifesto. https://fairershare.org.uk
Gibb, K (forthcoming) Council Tax and the Wider Reform of Property Tax in the UK. Policy Press: Bristol.
Gibb, K and Leishman, C (2025) Sustainable Housing Policy in Scotland: Reforming Devolved Property Taxation. CaCHE: Glasgow.
Leunig, T (2024) A Fairer Property Tax: A Practical Alternative to Reform Stamp Duty and the Council Tax. Onward: London
Macfarlane, L, Wheatley, H, and Castro, J-C, with Stark, G and Reed, H (2026) Funding Scotland’s Future: Tax Reform for a Just Transition. Future Economy Scotland: Edinburgh.
Muellbauer, J (2023) Why we need a green land value tax and how to design it. NET Oxford Working Paper No.2023-12.
Muellbauer, J (2026) ‘The problem with the Mansion Tax is that it is badly designed’, Financial Times, January 21 2026
Soaita, A, Gibb, K and Maclennan, D (2019) Housing Wealth Inequalities in Scotland: An Evidence Review. CaCHE: Glasgow.
