Homes hit by mansion tax could double as Labour considers cut to £1.5M in Budget

The number of homes hit by the mansion tax would double if Labour decides to drag owners of £1.5million-plus properties into its net, property experts warn.According to data from property agent Hamptons, this would more than double the number of homes hit by the mansion tax, from 135,000 to 272,000. The charge would fall disproportionately on parts of England, with almost 80 per cent of the properties affected in London and the South East. The so-called mansion tax was announced by former Chancellor Rachel Reeves in her October 2025 Budget and is set to be levied on homes worth £2million or more from April 2028.Officially known as the High Value Council Tax Surcharge, it will be paid as an annual council tax surcharge on homes in England, starting at £2,500 per year and rising to as much as £7,500 for the most expensive properties. However, government sources have confirmed that Prime Minister Andy Burnham and Chancellor John Healey are considering reducing the threshold where the tax kicks in to £1.5million in the Budget. Wealth tax: It is rumoured that Labour could apply a new tax surcharge to homes worth more than £1.5million, rather than £2million as was previously proposed If the mansion tax threshold is cut to £1.5million, based on today's house prices, 150,500 homes in London would pay it. This is a 79 per cent on the 84,000 at the current £2million threshold.In the South East, 62,500 families would pay a mansion tax set at £1.5million-plus – an increase of 127 per cent on the 27,500 who would pay at £2million.The next most affected region would be the East of England, where just under 24,000 households would pay a mansion tax if it was set at the proposed new level. However, on a percentage basis, the East Midlands would see the biggest jump in mansion tax-paying households if the threshold was dropped. As it stands, just 1,165 households are valued at £2million or more in the region and would pay the levy. But at £1.5million, 3,294 households would have to pay – a rise of 183 per cent. The West Midlands would see a 178 per cent rise, with homes affected going from 1,812 to 5,040. In Hamptons' report, lead analyst David Fell said: 'Lowering the threshold disproportionately taxes regional wealth and premium suburban homes, pulling a vast new cohort of regional buyers into a tax originally designed for international high-net-worth hubs.' Hamptons also said that the number of homes worth £1.5million or more in England had fallen by almost 10,000 since Rachel Reeves announced the new tax, as house prices drop in more affluent areas. In October 2026 there were 144,500 and now there are just under 135,000, it said. The average price of a home coming up for sale in Britain's richest borough, Kensington and Chelsea, recently fell by £95,000 in a month according to Rightmove. 'Lowering the threshold from £2.0 million to £1.5 million does far more than just bring a few extra luxury properties into scope. 'It shifts the geographic impact of the tax, exposes the compounding nature of fiscal drag, and collides head-on with a cooling prime property market.'Fiscal drag is when tax thresholds stay frozen for long periods rather than rising in line with inflation, meaning more people are dragged into higher rates when their income rises. How to find a new mortgage Mortgage rates have jumped as conflict with Iran has driven up inflation expectations and dashed hopes of interest rate cuts.If you need a mortgage because you are buying a home, or your current fixed rate deal is due to end, you should explore your options as soon as possible. This is Money has a long-standing partnership with fee-free broker L&C, to provide you with expert mortgage advice.Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.Or use L&C’s online Mortgage Finder to search thousands of deals from more than 90 different lenders to discover the best deal for you.Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage