Andy Burnham, the Labour MP for Makerfield widely expected to replace Sir Keir Starmer as Prime Minister in July, is considering introducing four new council tax bands with a lower threshold for the mansion tax surcharge. Reports indicate he plans to include homes worth £1.5 million, expanding the tax base significantly.
Proposed council tax bands
Under the current plan, four bands are proposed: a £2,500 charge for homes valued between £2 million and £2.5 million, £3,500 for £2.5 million to £3.5 million, £5,000 for £3.5 million to £5 million, and £7,500 for homes above £5 million. However, Burnham is considering lowering the starting threshold to £1.5 million, which would capture an estimated 150,000 additional households, according to Michael Bruce, Chief Executive of estate agent Purplebricks.
Industry concerns
Jeremy Leaf, north London estate agent and former RICS residential chairman, warned: “Hopefully, the penny has dropped for Labour’s likely next leader and Burnham has recognised what many others have noticed: If Mansion Tax rates are set too high, transaction numbers will be compromised. This, in turn, will have an even more damaging effect on job and social mobility – as well as the Treasury coffers.” He added that the tax may be popular among Labour supporters but the difficulty of implementation and appeal processes mean costs could exceed revenue, especially as property prices near thresholds have already started to drop.
Impact on homeowners and builders
Leaf highlighted that the impact would be greater in areas with rapid house-price growth, such as London and the South East, and on asset-rich, cash-poor pensioners who bought homes years ago. Builders could also suffer if homeowners avoid improvements that push property values into the higher bracket. “The possible change highlights another problem. Speculation about this and other property taxes is creating the very problems the Government should be trying to avoid – a reduction in housing market activity,” he said.
Economic ramifications
Michael Bruce told the Daily Mail: “An estimated 150,000 additional households could be caught if the threshold falls to £1.5million. If the Government wants growth, this is the wrong place to start. Housing is one of the UK’s biggest economic drivers, yet the market is already fragile. Policies that discourage people from moving don’t just affect homeowners – they hit buyers, sellers, tradespeople, retailers and the wider economy.”
