Labour has scrapped plans to lower the mansion tax threshold from £2 million to £1.5 million, sparing more than 60,000 London homeowners from the charge.
The Treasury confirmed the High Value Council Tax Surcharge (HVCTS) threshold will remain at £2 million, following speculation that it would be reduced to plug funding gaps. The U-turn comes after London MPs raised concerns about the impact on families in the capital.
Threshold Decision
Data from property agent Hamptons revealed that lowering the threshold to £1.5 million would have dragged 271,000 homes into paying the tax, rather than the current figure of 134,000. The most impacted constituency would have been Kensington and Bayswater, with an additional 3,000 households hit. Hampstead and Highgate had the second highest number, with Chelsea and Fulham in third.
Paula Higgins, CEO of the Homeowners Alliance, previously told The Express that it was "definitely a tax on London and the southeast".
Tax Bands and Charges
The proposal to drop the threshold was first unveiled by former Chancellor Rachel Reeves last year. It was then reported that John Healey was considering lowering it ahead of the latest budget.
The Treasury has confirmed that properties above the £2 million threshold will be placed into tax bands based on their value. Properties valued between £2 million and £2.5 million will be charged £2,500, those between £2.5 million and £3.5 million will be taxed £3,500. Meanwhile, those between £3.5 million and £5 million will be charged £5,000, and £5 million plus will be hit by £7,500. Charges will increase in line with CPI inflation each year from 2029-30 onwards.
Elizabeth Bradley, Partner at BCLP international law firm, said: "After considerable speculation, the Chancellor has not announced lowering the threshold for the application of the High Value Council Tax Surcharge, or 'mansion' tax. This will not happen, at least not yet. Although the political pressure to address perceived council tax unfairness across the UK is unlikely to diminish in some quarters."
Revenue and Impact
Arjun Kumar, a finance specialist and co-founder of Taxd, said: "Leaving the threshold alone is likely a move to appease the masses but the Chancellor should demonstrate some courage and backbone and overhaul the system that is still using 1991 valuations because that's where the real unfairness to British taxpayers lives."
The Treasury said: "The High Value Council Tax Surcharge (HVCTS) is a new charge on owners of residential property in England worth £2 million or more in 2026, taking effect in April 2028."
"Under the current system, a band D property in Darlington or Blackpool, today worth around £400,000, pays £2,400 to £2,600 annually. A band H property in Mayfair valued at £10m pays around £2,100. The HVCTS is designed to address the largest inequalities in the Council Tax system, by ensuring owners of the most valuable properties pay a fairer share."
"Homeowners, rather than occupiers, will be liable to the surcharge and will continue to pay their existing Council Tax alongside the surcharge. The HVCTS is estimated to raise around £400 million of revenue per year from 2028/29 to support funding for local government services."
It added: "The Valuation Office will conduct a targeted valuation exercise to identify properties above £2 million and therefore in scope. Fewer than 1% of properties in England are expected to be above the £2 million threshold."
Properties above the £2 million threshold will be placed into bands based on their property value, with charges increasing in line with CPI inflation each year from 2029-30 onwards. Decisions on whether to uprate bands will be taken alongside revaluations.
