John Healey’s planned changes to the mansion tax mean more than a quarter of a million families will be hit with the levy.
Some 270,000 homes will have to pay the fee if the Chancellor goes ahead with proposals to lower the starting threshold to £1.5m.
The tax was first announced by Rachel Reeves at the Budget last November as an annual charge on properties worth more than £2m. Properties above this valuation would pay a £2,500 annual charge, with the scheme due to start in April 2028.
Properties worth £2.5m to £3.5m are to be hit with a £3,500 fee, rising to £5,000 for homes valued between £3.5m and £5m. The upper threshold is a £7,500 charge for houses worth more than £5m. This fee is applied on top of council tax.
At the time, it was estimated that 134,000 homes would be required to pay the levy, raising about £400m each year by 2029-30.
According to The Times, the Chancellor is now reportedly set to lower the starting threshold to properties worth £1.5m, which would double the number of homes affected to around 270,000.
Analysis by Dan Neidle, the founder of Tax Policy Associates, has shown that the proposed alterations could raise around £800m per year.
To reach this figure, he has assumed that the £2,500 charge would be lowered to affect houses worth £1.5m-£2m and that the sliding scale would continue as previously outlined until houses costing more than £5m are charged an annual £10,000 fee.
‘Serious downside’
Mr Neidle has warned that making these changes could have a “serious downside”, as adjusting a tax after it has been announced but before it has been implemented undermines perceptions that Britain has a stable tax system.
Analysis shows that about half of the homes subject to the tax in the new price bracket would be in London and a further 25 per cent would be in Surrey and Oxfordshire.
Only a small number of affected buildings would be in the North, a region with which Andy Burnham, the Prime Minister, has a strong connection.
Four London councils – Wandsworth, Kensington and Chelsea, Westminster and Richmond – wrote to Mr Healey urging him to ditch the “unfair” tax that they said placed “a disproportionate burden on London residents”.
