Labour Scraps Plan to Broaden 'Mansion Tax' Amid Backlash

Labour appears to have abandoned plans to extend the "mansion tax" to a wider range of properties in an upcoming Budget, following significant backlash. Chancellor John Healey was reportedly considering lowering the threshold for the property levy from £2 million to £1.5 million.

Such a move would have effectively doubled the number of affected properties to 272,000. Analysts had warned that this could bring one in four detached homes in London into the scope of the tax. The charges, which could reach £7,500 annually, were projected to disproportionately affect the capital and the South East, with four-fifths of those impacted expected to reside in these regions.

The proposal had raised concerns among some Labour Members of Parliament, including former Treasury minister Rachel Blake. However, Mr. Healey is now understood to believe that expanding the levy, which is scheduled to take effect in 2028, would prove too controversial.

The Sunday Times reported that Mr. Healey aims to build public consensus around the charge before considering any increases. Estate agents have previously cautioned that the initial proposals have already negatively impacted the London property market.

During the Conservative Party conference, Shadow Chancellor Andrew Griffith pledged to reverse the mansion tax if the party were to win power. Kemi Badenoch also sought to emphasize the Conservatives' commitment to home ownership by promising to remove main homes from inheritance tax entirely.

Former Chancellor Rachel Reeves initially announced the council tax surcharge on homes valued at £2 million or more last year. Under the government's current plans, set to begin in April 2028, properties valued between £2 million and £2.5 million would face an additional annual charge of £2,500. This amount would increase to £3,500 for homes worth £2.5 million to £3.5 million, and to £5,000 for properties valued between £3.5 million and £5 million. Homes exceeding £5 million would be subject to a £7,500 charge.

The levy is estimated to generate approximately £400 million in its first year, though the Treasury anticipates implementation costs of at least £350 million.