SNP's 'mansion tax' plans could cause 'lasting harm' to housing market, ministers warned

The Scottish Government has launched a public consultation into its plans to hike up council tax on all properties worth more than £1 million in a move which could raise an extra £16m.

If approved, it would see two new council tax bands created (Band I and Band J), increasing council tax by £3,600 a year for homes valued at more than £2m and by £720 for those valued at between £1m and £2m.

This would affect around 15,000 of Scotland’s most expensive homes, doubling some council tax bills to £7,700 a year.

Introducing a mansion tax was a key part of the SNP’s budget plans published earlier this year and could raise up to £16m, which would be distributed across Scotland’s 32 local authorities.

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However, this is only a small increase on the £3.5 billion local authorities are expected to collect in council tax revenue in 2026/27.

Craig Hoy MSP, the Scottish Conservatives’ finance spokesman, said this is a “performative proposal” that “falls down on closer inspection”.

He said: “In targeting a small minority of properties, the revenues these new bands would bring in won’t touch the sides, and that’s before the administrative costs are factored in.

“But there is a real danger that these punitive rates put people off buying in Scotland which could damage the entire housing market.

“A mansion tax would also unfairly hit some asset-rich, cash-poor individuals - such as widows on modest pensions who are still living in the family home.

“Like rent controls, a mansion tax sounds superficially attractive but would actually do lasting harm to the housing market.”

Mr Hoy said Scottish ministers should instead cut welfare spending to better fund councils.

The consultation will run until August 24. A total of £5m has been set aside for a revaluation on all properties estimated to be worth over £1m as part of the proposals.

More than half of the £1m properties sold in 2024/25 were in Edinburgh.

Meanwhile, the Scottish Greens described the consultation was a “significant step” but party MSP Lorna Slater said it “can’t be the end of the conversation”.

“There’s much further to go if we are to give our services the funding they deserve,” she added.

“We need to go further to empower councils, reduce inequality and build a tax system that reflects people’s ability to pay.

“With more Green MSPs than ever before, we’ll continue making the case for the bold change that is needed to build a fairer and greener Scotland.”

Deputy First Minister Jenny Gilruth said: “Our approach to tax is based on fairness - asking the wealthiest among us to contribute a bit more.

Ms Gilruth said this “progressive approach” to taxation will help deliver things such as free university tuition, free prescriptions, and the SNP’s plans to introduce a nationwide £2 cap on bus fares.

She added: “Additional revenue raised through these new council tax bands will be retained in full by local government to support the local services communities rely on - unlike the UK Government’s proposals for a similar scheme that are set to be returned to the Treasury.

“In launching this public consultation, we are keen to hear the views of people and communities right across Scotland.”

Currently council tax bands are determined based on 1991 property valuations. There is cross-party support in Holyrood for this to be reformed, but so far the SNP government has not brought forward concrete plans to do so.