Nearly 62,000 more London homeowners could be forced to pay the “mansion tax” if Andy Burnham decides to lower the threshold for paying it to £1.5 million, according to experts.
Such a controversial move is said to be a “live” discussion within the Treasury as Chancellor John Healey prepares to deliver the Budget on October 28.
The original plans unveiled by his predecessor Rachel Reeves, which apply to properties worth over £2 million, will hammer homeowners with additional annual charges of between £2,500 and £7,500 from April 2028.
But if Mr Healey decides to lower the threshold to £1.5 million it will be even more punitive on the capital.
Hammersmith and Fulham, Wandsworth, Kensington and Chelsea, Westminster and Camden would be the boroughs hardest hit by extending the reach of the levy.
The Chancellor’s officials are believed to be drawing up a range of scenarios to rake in more cash for the Treasury as part of tax-raising measures to limit any cuts to public spending.
Experts at Tax Policy Associates have laid out their own assessment of how a “mansion tax” set at a threshold of £1.5 million would impact the country.
Dropping the threshold to this level would mean the number of properties caught would rise from around 123,000 to around 245,000.
Just over half of the newly-caught homes would be in London, 61,787 out of around 122,000.
The extra bill for the capital would be £154 million, according to the analysis.
Overall, 144,104 homes in the city would be charged the new levy, with a total bill of £624 million.
Already, house prices have been falling in 20 London boroughs with four, Westminster, Kensington and Chelsea, Tower Hamlets and Camden, seeing drops of more than 10%, according to official figures.
Tax Policy Associates, founded by Dan Neidle, believes the Chancellor would reform the levy to bring in more for the Treasury rather than just lowering the threshold.
The experts explained: “If those new properties are charged a lower amount than the current lowest band (£2,500/year) then the net revenue is modest, once you take into account the additional cost of valuing all those additional homes.
“So it’s more plausible that £1.5m properties would be charged £2,500/year, with the £2m and upper band charges all increased.
“That could roughly double the net revenue, to about £800m – and we assume this is how any extension of the mansion tax would work.”
Under such reforms, homes worth between £1.5 million and £2 million would face a “mansion tax” of £2,500, for those between £2 million and £2.5 million it would be £3,500, between £2.5 million and £3.5 million £5,000, between £3.5 million and £5 million £7,500, and over £5 million a new top levy of £10,000.
The £800 million predicted revenue for the Treasury takes into account homeowners’ response to avoid paying the levy, as well as the extra valuation and administration costs.
An extra 7,324 properties in Hammersmith and Fulham would be caught by the levy, according to the analysis, bringing the total to 19,990 and a bill of £90.6 million.
In Wandsworth, a further 6,526 homes would be hit, making a total of 12,526 and bill of £47 million.
In Kensington and Chelsea, an additional 5,146 properties would be impacted, taking the overall number to 22,425 and the bill to £131 million.
In Westminster, 4,739 more homes would be forced to pay the charge, increasing the total to 12,932 and a bill of £60.3 million.
In Camden, an extra 4,649 properties would have to pay the levy, with the overall number increasing to 11,907 and a bill of £54.3 million.
Richmond would see 4,332 more homes caught by the tax, Barnet 3,294, Islington 2,906, Haringey 2,881, Southwark 2,600, Ealing 2021, Brent 1,869, Lambeth 1,786, Merton 1,745, Bromley 1,729, Hackney 1,520, and Tower Hamlets 1,331.
The tax experts stressed that 85% of the additional homes caught by the broader tax would be in London and the wider South East, with the capital’s commuter belt heavily impacted, particularly in Surrey areas such as Guildford, Esher and Walton, Runnymede and Weybridge, Reigate, and Farnham.
Ministers declined to comment on Budget speculation.
