Labour MP Rachel Blake has expressed concern over potential plans to lower the threshold for a proposed mansion tax from £2 million to £1.5 million. The former Treasury minister stated that such a change could lead to unintended consequences and unfairly target family homes.
This potential adjustment comes as reports suggest that current Chancellor John Healey is considering the lower threshold to increase government revenue. If implemented, lowering the threshold to £1.5 million could double the number of homes subject to the tax, impacting an estimated 272,000 properties. Analysis from estate agents Hamptons indicates that this would bring one in four detached homes in London into the scope of the tax.
The tax would also disproportionately affect London and the South East, with nearly 80 percent of affected properties located in these regions. Blake argued that there is a significant difference between high-value properties, which may not be primary residences, and family homes that have seen substantial value increases over decades, particularly since the original council tax valuations were set.
Former Chancellor Rachel Reeves had previously introduced a council tax surcharge on homes valued at £2 million or more, set to take effect in April 2028. At the time, Reeves stated the measure would address a "longstanding source of wealth inequality." However, lowering the threshold to £1.5 million could force a greater number of terraced homes in London to pay the tax.
Senior figures within the Labour party have voiced similar reservations. One senior MP noted that a lower threshold could impact individuals who purchased homes before price surges and may not have readily available cash for additional property taxes. This MP also criticized the potential for such a tax to increase bills for London residents simply due to their location, in contrast to government messaging about tackling the cost of living crisis.
Dame Emily Thornberry, Labour MP for Islington South and Finsbury, suggested that broadening the tax's scope might only serve as an interim solution. She emphasized the need for a comprehensive review of the council tax system, given that the bands have not been updated for decades while the gap between rich and poor has widened.
Blake also commented on the reported leak of these potential plans, stating that such information can be damaging and influence individual decision-making prematurely, which she believes is not in the country's best interest.
Under the current proposals for homes valued between £2 million and £2.5 million, an additional £2,500 per year would be levied. This amount increases to £3,500 for properties between £2.5 million and £3.5 million, £5,000 for homes valued between £3.5 million and £5 million, and £7,500 for properties exceeding £5 million. The levy is projected to generate approximately £400 million in its first year, with an estimated implementation cost of at least £350 million for the Treasury.
Conservative politicians have criticized the potential move. Shadow housing minister David Simmonds suggested that the tax could target suburban properties like semi-detached houses and bungalows. Reform's treasury spokesperson Robert Jenrick called it "another broken Labour promise," highlighting the shift from an initial pledge to only tax homes over £2 million.
Ellie Chowns, parliamentary leader for the Green Party, criticized the proposed measures as "half-measures and minor tweaks" unlikely to raise significant funds.
A Treasury spokesperson stated that decisions regarding taxation are ultimately for the Chancellor to announce at fiscal events and declined to comment on rumors or speculative proposals.