Plans to extend Labour’s mansion tax to £1.5m homes have reportedly been ruled out, with new research revealing that almost one in 10 properties on the market in London could have been caught by the lower threshold.
Chancellor John Healey has rejected calls to reduce the proposed High Value Council Tax Surcharge threshold from £2m to £1.5m, according to reports in the Sunday Times and Financial Times.
The Treasury had reportedly considered widening the tax as it looks to raise additional revenue to fund cost-of-living support.
However, new analysis from estate agency Yopa reveals the scale of the potential impact on homeowners, particularly in London and the South East.
The research, based on Rightmove listings on 6 October, found that 11,848 of the 792,456 homes marketed for sale across England had asking prices of £2m or more. That represents just 1.5% of available stock.
Reducing the threshold to £1.5m would have increased that figure to 22,092 properties, or 2.8% of homes on the market.
That is an additional 10,244 properties, representing an 86% increase in the number of homes potentially exposed to the surcharge.
London would have taken the biggest hit
The impact would have been particularly pronounced in the capital.
Of the 11,848 homes currently marketed at £2m or more across England, 6,963 are in London. That accounts for 59% of the national total.
At the existing threshold, 5.8% of London properties listed for sale meet the £2m price level.
However, lowering the threshold to £1.5m would have increased the number to 11,316 homes, equivalent to 9.4% of available stock.
That means a further 4,353 London properties would have crossed the proposed lower threshold, based on current asking prices.
Outside London, the South East would have faced the greatest exposure, with 5,025 homes marketed at £1.5m or more, representing 3.4% of available stock.
The South West followed at 1.7%, while the East of England stood at 1.4%.
The figures are based on asking prices rather than formal property valuations, so they do not establish how many homeowners would ultimately become liable for the tax.
‘£1.5m doesn’t necessarily buy you a mansion’
Verona Frankish, chief executive of Yopa, said the findings demonstrate how significantly a lower threshold could have widened the tax’s reach.
She said: “On the face of it, the mansion tax is a measure that will affect a relatively small proportion of homeowners across England, but our research demonstrates just how much wider its reach could have been had the Government decided to lower the threshold to £1.5m.”
Frankish added: “The concern has always been that £1.5m doesn’t necessarily buy you a mansion in London. In many parts of the capital, this is the price of a perfectly ordinary family home, and lowering the threshold would have risked unfairly penalising homeowners who are property wealthy on paper, but aren’t necessarily enjoying the lifestyle or disposable income that the term ‘mansion tax’ implies.”
Estate agents face uncertainty ahead of 2028
Former chancellor Rachel Reeves announced the surcharge last year, with implementation scheduled for April 2028.
Under the existing proposals, owners of homes valued between £2m and £2.5m would face an additional annual charge of £2,500. This would rise to £7,500 for properties worth £5m or more.
Estate agents have already warned that the proposed levy could influence pricing, buyer behaviour and transactions at the upper end of the housing market.
Adam French, head of consumer finance at Moneyfacts, previously warned: “Lowering the threshold for the proposed high-value property surcharge will have a wider effect on the capital’s homeowners than the label of a ‘mansion tax’ suggests.”
The policy has also attracted criticism from opposition politicians.
Shadow chancellor Andrew Griffith previously said: “A so-called ‘mansion’ tax is a tax on family homes and could hit hundreds of thousands of people – especially in London and the South East – through no fault of their own.”
Reform UK has questioned the measure, pointing out that Labour did not include a mansion tax in its 2024 general election manifesto.
Despite reports that the Chancellor has ruled out lowering the threshold, the Treasury has not formally confirmed the decision.
A spokesperson said: “As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”
