'Tax rises' in Budget: How London could be hammered with £624m 'mansion' levy on homes over £1.5m

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.

Chancellor John Healey

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But if Mr Healey decides to lower the threshold to £1.5 million it will be even more punitive on the capital.

Dropping the threshold to this level would mean the number of properties caught would rise from around 123,000 to around 245,000.

Homeowners in Chelsea and Kensington could be hit with a ‘mansion tax’ bill totalling £131 million

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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.

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.

Nearly 12,000 homes in Camden would be caught by a ‘mansion tax’ on properties worth over £1.5 million

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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.

Thousands more homes in Richmond would be hit by a ‘mansion tax’ on homes worth over £1.5 million

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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.

New Prime Minister Andy Burnham has previously supported a new property tax, to replace council tax and stamp duty, which would land the capital with an extra £7.5 billion bill.

But the PM has made clear that he has no plans to imminently introduce such a major homes tax shake-up.