Plans to extend Labour’s proposed mansion tax to properties valued at £1.5 million have reportedly been dropped. The move follows new research showing that a lower threshold could have brought thousands more homes, particularly in London, within the scope of the proposed surcharge.
According to reports in the Sunday Times and the Financial Times, Chancellor John Healey has rejected proposals to reduce the threshold for the High Value Council Tax Surcharge from £2 million to £1.5 million.
The Treasury had reportedly explored expanding the tax to generate additional funds for cost-of-living support. However, research by estate agency Yopa highlights how such a change could have affected homeowners across England.
Using Rightmove listings from 6 October, Yopa found that 11,848 of the 792,456 properties advertised for sale in England had asking prices of at least £2 million. This represented just 1.5% of homes currently on the market.
Had the threshold fallen to £1.5 million, the number would have risen to 22,092 properties, equivalent to 2.8% of available homes. This would have added 10,244 properties to the potential tax bracket, an increase of 86%.
London Would Have Faced the Greatest Impact
London would have been the region most affected by a lower threshold. Of the 11,848 properties listed at £2 million or above across England, 6,963 were in the capital, accounting for 59% of the national total.
At the existing threshold, 5.8% of homes advertised for sale in London met the £2 million mark. Reducing it to £1.5 million would have increased the figure to 11,316 properties, or 9.4% of available stock. That represents an additional 4,353 homes potentially falling within the surcharge’s reach.
The South East would have experienced the next-largest impact outside London, with 5,025 properties listed at £1.5 million or more. These homes accounted for 3.4% of the region’s available stock. The corresponding figures were 1.7% for the South West and 1.4% for the East of England.
However, the research is based on advertised asking prices rather than formal property valuations. It therefore indicates the potential scale of the policy’s reach rather than confirming how many homeowners would actually have to pay.
Concerns Over What Counts as a Mansion
Yopa chief executive Verona Frankish said the findings illustrated how much broader the surcharge could have become if the Government had opted for the lower threshold.
She explained that while the proposed tax was expected to affect a relatively small proportion of homeowners, reducing the threshold would have significantly expanded its reach.
Frankish also questioned whether a £1.5 million property should necessarily be considered a mansion, particularly in London. In many parts of the capital, she noted, that price could buy an ordinary family home rather than a luxury property.
She warned that a lower threshold could have placed an additional financial burden on homeowners whose properties have high market values but whose incomes and disposable funds do not reflect that wealth.
Surcharge Still Planned for 2028
Former Chancellor Rachel Reeves announced the proposed surcharge last year, with the measure scheduled to take effect in April 2028.
Under the current proposals, owners of properties valued between £2 million and £2.5 million would pay an additional £2,500 annually. The charge would rise to £7,500 for homes worth £5 million or more.
The policy has already prompted concerns among estate agents that it could affect asking prices, purchasing decisions and sales activity in the higher end of the housing market.
Moneyfacts head of consumer finance Adam French previously cautioned that lowering the threshold could affect far more London homeowners than the term ‘mansion tax’ might suggest.
The proposal has also faced opposition from Conservative politicians. Shadow Chancellor Andrew Griffith argued that the levy could affect family homes, particularly in London and the South East, leaving homeowners facing additional costs despite having done nothing to bring about the change.
Reform UK has also criticised the policy, noting that Labour did not include a mansion tax in its 2024 general election manifesto.
Although reports suggest the Chancellor has ruled out reducing the threshold, the Treasury has not formally confirmed the decision. A spokesperson said tax decisions would be announced by the Chancellor at fiscal events, rather than through responses to speculation or unconfirmed proposals.
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