The areas hit by mansion tax if Burnham cuts threshold to £1.5m, mapped

Widening the scope of the mansion tax would pull in people in the Midlands and North of England who had hoped to escape the charge, Andy Burnham has been warned. The new Prime Minister is said to be considering reducing the threshold of the levy from £2m to £1.5m to raise more money for the Treasury. But doing so would make the mansion tax more of a nationwide charge, rather than it being confined to London and the South East, say property experts. Shorts Lowering the threshold will also hit a “different kind of home” in the capital – affecting middle-class families in relatively modest three- and four-bedroom terrace houses. Wider levy would pull in 137,000 more homes Keir Starmer’s government announced a “high-value council tax surcharge” on properties valued at more than £2m at the last Budget – a plan expected to raise £400m a year. Those in homes valued at over £2m will pay £2,500 a year – rising to £7,500 a year for homes worth over £5m. If Burnham chose to lower the threshold to £1.5m it would affect an extra 137,000 households, according to new analysis by property company Hamptons shared with The i Paper. It would also raise an extra £343m a year for the Treasury – if the homes valued between £1.5m and £2m had to pay the lowest annual surcharge level of £2,500. The Prime Minister is reportedly considering the move as a way of balancing the books. Lower threshold would hit the North David Fell, lead analyst at Hamptons, said setting the threshold at £1.5m would double the number of people facing the new tax bill – a 102 per cent increase. A wider levy would also start pulling in a lot more homeowners in the North and Midlands. In the North West, the number of households hit by the tax will rise from 3,249 to 7,639 households if the threshold is cut to £1.5m. In the West Midlands, the number of affected homeowners would rise from 1,812 to 5,040. “The bigger impact would be outside of London,” Fell said. “Reducing the threshold from £2m to £1.5m disproportionately captures more homes outside London. “While nationally the overall numbers rise [by] 102 per cent, across the Midlands and the North of England, the increase is between 150 and 180 per cent.” Fell said a wider mansion tax also had “the potential to hit a different type of home in London – it could pull in people in four-bedroom terrace homes. “It could affect a fairly modest family home bought in the right London neighbourhood a couple of generations ago which has since seen its value soar,” he added. Impact on three-bed London terraces Michael Dent, founder of Property Tax Lab, said that London and the South East would still feel the impact of a wider mansion tax more than elsewhere in the country. Some 35 per cent of all households in the Royal Borough of Kensington and Chelsea would be caught by a mansion tax with a threshold of £1.5m, while 25 per cent of owners in Westminster would be liable to pay it, said Dent. “Half would be in London and another quarter in the South East. In Wandsworth or Hackney, £1.5m to £2m buys a three-bed Victorian terrace – not a mansion,” said the property expert. Former chancellor Rachel Reeves argued that a mansion tax was necessary to help deal with “wealth inequality” when she announced it at the November Budget. But it could affect pensioners on “modest means”, experts have warned. Older people on low incomes have previously told The i Paper that the “incredibly unfair” levy could force them to sell their home. The Government is consulting next year on a deferral mechanism aimed at allowing cash-poor pensioners to delay paying the annual charge until their house is sold. Mansion tax putting ‘downward pressure’ on prices The latest Hamptons research shared with The i Paper shows that there are 9,587 fewer homes worth at least £2m in England than at the time of Reeves’s Budget last year. Buyers have been submitting offers that ensure the home’s value sits below the £2m threshold mark, as the tax policy places “downward pressure” on prices in the prime property market. The mansion tax “hasn’t helped the market at all”, said Fell. “It has had an impact since the Budget, particularly in London. If the threshold was reduced, it will hit prime markets in other parts of the country.” Could Burnham scrap council tax? Some Labour MPs are urging Burnham to go further than widening the scope of the mansion tax. The Labour Red Wall Group have called on the new PM to scrap council tax and replace it with a new proportional property tax. One proposal for a proportional property tax, first put forward by the Fairer Share Campaign, would be 0.48 per cent on the value of a property. The campaign group previously told The i Paper that people in poorer areas are “deeply penalised” by the current council tax system, which is based on outdated 1991 property values. Burnham said during his Makerfield by-election campaign that he was “personally keen to see reform of council tax”, calling it a “highly regressive tax”. A spokesperson for Burnham said was focus on “delivering good growth in every postcode” and “raising living standards”. They added: “On tax, he is committed to the 2024 manifesto.”