High-end homes face Budget double whammy as Healey mulls council tax hike and mansion tax

Owners of expensive homes face a double whammy as the Chancellor mulls the idea of introducing higher council tax bands as well as lowering the threshold for paying the mansion tax.

John Healey has conceded the Government is ‘evolving its stance’ on council tax – warning of possible change for those who have ‘extremely valuable properties’.

Targeting council tax, which brings in £47billion a year, is said to be a fairly easy way of raising more revenue, especially as the Treasury’s Valuation Office Agency is reviewing homes in the highest F, G and H bands to pinpoint those that will be subject to the mansion tax.

The current valuations were set in 1991. Since then, the average London house price has jumped by 500 per cent.

As a result, flats and houses in the capital that are today worth millions may face relatively modest council tax bills compared to properties in economically depressed areas where house prices have not risen by nearly as much.

A report issued on Friday by the Resolution Foundation think-tank claimed the capital ‘underpaid £3.1 billion’ in council tax in 2024-25 as a result of the ‘low’ council tax rates in the city.

John Healey has conceded the Government is ‘evolving its stance’ on council tax

The think-tank argues that if homes elsewhere were taxed at London rates, households would enjoy the equivalent of ‘a £12.3billion tax cut’. 

For instance, the council tax on a band H property – the most expensive category – in the west London borough of Hammersmith and Fulham is £3,039 a year.

This is less than the £3,072 annual bill on a far less expensive band E property in Blackpool.

At present, the council tax on a band H property is charged at twice that of a band D home.

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Robert Salter, a partner at accountancy firm Blick Rothenberg, says this is ‘inequitable’, and that introducing higher bills for band H homes would raise billions for cash-strapped local authorities.

More cash could be extracted if band G homes were also compelled to pay more council tax, as this category includes roughly eight times as many homes as band H, said the think-tank Tax Policy Associates.

Talk of council tax reform comes amid reports that Healey is also looking to cut the threshold for the mansion tax from £2million to £1.5million – although nine out of the ten areas that would be hardest hit are in London constituencies held by Labour MPs.

That would double the number of homes liable for the levy from 135,000 to 272,000, according to calculations by Hamptons.

The estate agent estimates 10,000 fewer homes will be hit by mansion tax since the levy was unveiled in last year’s Budget because of the gloom it has spread to the property market in affluent areas, where house prices are falling.

Revenues from the mansion tax, which takes effect in April 2028 and is officially known as the High Value Council Tax Surcharge, go into central government coffers.

Healey could also raise the amount of tax payable on different bands of mansion tax, which currently range from £2,500 a year on a property valued at £2million to £2.5million to £7,000 a year on a home priced at £5million or more. 

These existing charges will be up-rated every five years in line with the Consumer Prices Index measure of inflation.

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