Potential plans by Andy Burnham to lower the threshold for a "mansion tax" could nearly double the number of households affected, according to an analysis by tax experts. The proposed change would extend the High Value Council Tax Surcharge to properties worth £1.5 million and above, rather than the £2 million threshold set by Chancellor Rachel Reeves.
This adjustment could increase the number of properties subject to the tax from approximately 127,000 to 243,000. Tax Policy Associates estimates that this would draw more households from commuter belt regions into the tax net. Constituencies such as Esher and Walton in Surrey, Twickenham in south-west London, and Harpenden and Berkhamsted in Hertfordshire could each see nearly 2,000 additional homes affected.
Under Burnham's proposed £1.5 million threshold, London would see an estimated 146,275 homeowners liable for the tax. The South East region is projected to have 51,999 affected households, with Surrey accounting for 18,023 of those. Buckinghamshire and Hampshire would see 6,987 and 5,269 homes affected, respectively. The East of England could see 19,115 properties impacted, followed by the South West with 11,786.
While the current plans would see homes valued between £2 million and £2.5 million charged an additional £2,500 annually, the analysis suggests that if the threshold were lowered to £1.5 million, the tax take might not significantly increase. However, an alternative proposal suggests increasing the existing bands, potentially doubling the annual revenue to £800 million. This could mean homes valued between £2 million and £2.5 million paying £3,500, and the top rate for properties over £5 million rising to £10,000.
Experts warn that the proposed tax could have a detrimental effect on the property market, with some suggesting that properties above £1.5 million could become unsellable. This could create a ripple effect through more expensive markets, potentially impacting first-time buyers.
The valuation of properties for council tax purposes has not been updated since 1991. While the Treasury plans a targeted valuation exercise for properties over £2 million, expanding this to a £1.5 million threshold would require a significantly larger undertaking. Property experts anticipate challenges in accurately valuing millions of homes within the proposed timeline and expect homeowners to contest valuations.
Homeowners concerned about potential future tax liabilities may consider assessing their property's current market value. Information from property websites and local estate agents can provide an indication. The government is also consulting on a deferral scheme, which would allow homeowners who are asset-rich but cash-flow constrained to postpone payment until the property is sold, though interest may accrue.
Extreme measures such as selling parts of land or allowing properties to fall into disrepair to lower their perceived value are also discussed, though experts note that such actions would be challenging for many homeowners. Financial planners advise considering the tax's impact within the broader context of an individual's overall financial situation, including pension arrangements and investments, rather than making impulsive decisions about their homes.