Labour mansion tax raid to hit homes worth £1.5m

The government is considering plans to lower the mansion tax threshold to properties worth over £1.5m, a move that would hit nearly 300,000 homes.

Labour originally announced the tax on properties worth more than £2m in last year’s Autumn Budget by former chancellor Rachel Reeves. 

Properties over this valuation are set to pay a £2,500 annual charge from April 2028, while those worth £2.5m to £3.5m are to be hit with a £3,500 fee.

This rises to £5,000 for homes valued between £3.5m and £5m, with the fee applied on top of council tax.

Chancellor John Healey, is now debating extending the levy, meaning the number of homes caught in the mansion tax raid would reach 271,000 based on current values.

Healey under pressure

Government sources told The Times that lowering the threshold was a “live discussion” in the Treasury, as Healey attempts to locate £10bn to balance the books for the Autumn Budget in October.

Healey is facing increasing pressure to reduce his fiscal headroom after the war in Iran sent the cost of government borrowing spiralling.

The chancellor is aiming to lower his headroom from £23bn to £5bn, leaving economists to believe tax rises are inevitable, in particular those which tax wealth.”

But the government is not planning to push ahead with plans to overhaul stamp duty and council tax, despite both being championed by prime minister Andy Burnham before he entered Downing Street.

Affecting the market

Those who oppose mansion tax have warned that lowering the threshold would damage the property market, as people would deliberately undervalue their homes to dodge the fee.

Kirstie Allsopp, the presenter of TV property show Location, Location, Location told Times Radio: “It’s going to stop people adding value. It’s going to stop people doing basic maintenance, because everyone is going to be terrified of sending their property, which is worth £1.3 or £1.4m, over the £1.5m threshold.

“And anyone whose property is just over the threshold, they’re actively going to be damaging the value.

“People are going to stop looking after their homes for fear of the day when the person comes around and says, your home is worth more than £1.5m.”