UK Mansion Tax Threshold Cut Could Double Affected Homes, Experts Warn

Homes valued at £1.5 million or more could be subject to a new mansion tax, potentially doubling the number of households affected, according to property experts. Labour is reportedly considering lowering the threshold for its "High Value Council Tax Surcharge" from the previously announced £2 million to £1.5 million in an upcoming Budget.

According to data from property agent Hamptons, this change could increase the number of affected homes from 135,000 to 272,000, more than doubling the current figure. The tax, which was first announced by former Chancellor Rachel Reeves in October 2025, is slated to take effect from April 2028 and is intended to be an annual council tax surcharge on homes in England. The current plan mandates a surcharge starting at £2,500 per year, rising to £7,500 for the most expensive properties.

The potential reduction in the threshold is being considered by Prime Minister Andy Burnham and Chancellor John Healey.

Geographic Impact of Lowered Threshold

If the mansion tax threshold is reduced to £1.5 million, London and the South East of England would be disproportionately affected. In London, an estimated 150,500 homes would be subject to the tax, a 79% increase from the 84,000 homes affected at the £2 million threshold. For the South East, the number of affected households would rise by 127%, from 27,500 to 62,500.

The East of England would see just under 24,000 households pay the tax under the proposed £1.5 million threshold. However, the East Midlands would experience the largest percentage increase. Currently, only 1,165 households in the region are valued at £2 million or more. With a £1.5 million threshold, this number would climb to 3,294, an increase of 183%. Similarly, the West Midlands would see a 178% rise, with affected homes increasing from 1,812 to 5,040.

Lead analyst at Hamptons, David Fell, stated that lowering the threshold "disproportionately taxes regional wealth and premium suburban homes, pulling a vast new cohort of regional buyers into a tax originally designed for international high-net-worth hubs." He also noted that the number of homes worth £1.5 million or more in England has decreased by nearly 10,000 since the tax was announced, with just under 135,000 properties currently meeting this valuation, down from 144,500 in October 2026. This decline is attributed to falling house prices in affluent areas, with the average price of a home for sale in Kensington and Chelsea reportedly falling by £95,000 in a single month.

Fell further warned that reducing the threshold "does far more than just bring a few extra luxury properties into scope. It shifts the geographic impact of the tax, exposes the compounding nature of fiscal drag, and collides head-on with a cooling prime property market."

Fiscal drag occurs when tax thresholds remain static while incomes rise with inflation, inadvertently pulling more individuals into higher tax brackets over time.