Labour split over £1.5m mansion tax as MPs fear ‘ordinary families’ will suffer

Labour MPs have warned the Treasury against widening the incoming “mansion tax” to all properties worth more than £1.5m. One London MP told The i Paper that the move would be a “catastrophic electoral own goal”, while even some left-wingers representing seats elsewhere in the country fear it could hit “ordinary families” living in the capital. In last year’s Budget, then-chancellor Rachel Reeves announced that owners of properties in England valued at more than £2m will have to pay a surcharge of at least £2,500 from 2028. Shorts The high value council tax surcharge – which was quickly dubbed the mansion tax – will increase depending on the price of a property, with the highest charge of £7,500 affecting houses valued at £5m or more. The Times reported last week that Chancellor John Healey is considering lowering the threshold for the tax from £2m to £1.5m in his first Budget on October 28. Doing so would increase the number of homes forecast to pay the charge from 134,000 to 271,000 based on current values. With about half of the properties affected by a £1.5m threshold located in London, the suggestion that the Chancellor is looking at the idea has sparked alarm among Labour MPs with seats in the capital. Labour currently controls 58 of London’s 75 parliamentary seats and is fighting a crucial by-election against the Green Party in Holborn and St Pancras to hang on to Sir Keir Starmer’s old seat. The Greens have selected its leader, Zack Polanski, as the candidate for the north London seat. On Monday, the Greens also criticised the £1.5m threshold idea. Dr Ellie Chowns, Green MP for North Herefordshire, told The i Paper: “This is more tinkering from Labour under Andy Burnham, when many people hoped he’d bring real change. “Instead of half-measures and minor tweaks which are likely to end up raising little money, Greens want to see fair taxation of wealth to pay for the investment this country desperately needs.” Commenting on the idea of reducing the threshold to £1.5m, a London Labour MP told The i Paper: “I don’t support this and I don’t think it will happen as it would be a catastrophic electoral own goal.” While moves to increase the taxation of expensive properties tend to find support on the Labour left, some left-wingers representing seats outside London are cautious about the idea of lowering the threshold. Jon Trickett, MP for Normanton and Hemsworth in West Yorkshire, said: “I believe it is right to tax mansions at a reasonable rate but the threshold needs careful thought. “In parts of the country £1.5m would indeed buy you something akin to a mansion. I am, however, less sure that is true in central London where prices have been driven up often by a kind of gold rush of foreign investors in real estate. The consequence could be that ordinary families who bought their home years ago could well be impacted but lack the means to pay any new tax.” He added: “The Government needs to reflect very carefully if they intend to lower the threshold with a detailed published impact assessment to justify their decision.” Steve Rotheram, the Mayor of the Liverpool City Region and a close Burnham ally, has also previously warned against measures that impact people who may be “capital rich” but do not necessarily have high incomes. Meanwhile, some Labour MPs want Burnham to take a much more radical approach to taxing property rather than simple adding a mansion tax on top of existing council tax bands. A group of Labour MPs mainly based in the North of England want Burnham and Healey to scrap stamp duty and council tax and replace them with an annual proportional property tax based on the value of a home. Jonathan Hinder, MP for Pendle and Clitheroe, who is among those campaigning for such a change, posted on X on Monday: “I don’t want to see a ‘mansion tax’ bolted on to a broken system. Let’s do proper tax reform, scrapping two stupid taxes and replacing them with a proportional property tax.” Brian Leishman, the Scottish MP for Alloa and Grangemouth, said that the Government should prioritise measures such as equalising capital gains tax with income tax and introducing an annual “wealth tax” of 2 per cent on people with assets over £10m. “Let’s tax multi-millionaires with generational wealth, not workers,” he said. A Treasury spokesperson said: “As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”