John Healey, the current Chancellor, is reviewing the mansion tax set out by his predecessor Rachel Reeves and is contemplating lowering the threshold at which the tax applies. This change could extend the tax to nearly 300,000 homes, sparking discussions around a potential “war on the middle class.”
The original plan, announced by the Labour government in last November’s budget, proposed an annual levy between £2,500 and £7,500 on properties valued above £2 million. This was projected to affect approximately 134,000 homes. However, Mr Healey is now considering reducing the threshold to £1.5 million, which would double the number of liable households to around 271,000 based on current property values.
A source close to the discussions described lowering the threshold as a “live discussion,” while another Whitehall insider suggested the approach would represent a more “aggressive” method of taxing wealth.
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Mark Pollack, director of London-based estate agent Aston Chase, expressed concerns about the tax’s wider impact. He noted, “There is a real misconception that this would only impact the super-wealthy. But in London, many people live in homes worth over £1.5 million who are just managing financially. They’ve already been dealing with rising interest rates and energy costs, and this could be the straw that breaks the camel’s back.”
Similarly, Lucian Cook, head of residential research at Savills, warned that the tax could bring many middle-class families within its scope, especially in London and the southeast. He said, “It would no longer be a tax on mansions but on relatively large family homes across London and smaller properties in central areas. There’s a risk that financially stretched homeowners might have to leave the properties they’re emotionally attached to, which is a concerning consequence.”
Arun Advani, director of the Centre for the Analysis of Taxation, highlighted that currently, people living in lower-value properties pay a higher rate of council tax than those in more expensive homes. He remarked, “Lowering the mansion tax threshold could make property tax rates more equitable, though a transition plan might be necessary for those facing significant increases in their bills.”
A Treasury spokesperson stated, “As has always been the case, decisions on tax are a matter for the Chancellor to announce at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”