Andy Burnham, the Labour MP for Makerfield and expected successor to Sir Keir Starmer as Prime Minister later this month, is considering the introduction of four new council tax bands as part of his fiscal reforms.
Reports indicate that Burnham aims to lower the threshold for the controversial mansion tax surcharge to include homes valued from £1.5 million—down from the current £2 million minimum. Presently, the surcharge applies across four bands: £2,500 for properties worth £2 million to £2.5 million, £3,500 for homes between £2.5 million and £3.5 million, £5,000 for values from £3.5 million to £5 million, and £7,500 for properties valued above £5 million.
Estate agent Jeremy Leaf, former RICS residential chairman, highlights potential economic drawbacks of this proposal. He warns that higher mansion tax rates risk lowering property transactions, which could harm employment, social mobility, and government revenues. Leaf notes, “While the mansion tax appeals to Labour supporters, the practical challenges and appeal processes may incur costs exceeding revenues, especially as property prices near these thresholds have already begun to decline.”
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Leaf also expresses concern about regional impacts, particularly in London and the South East where housing prices have surged, and on asset-rich but cash-poor pensioners who bought their homes years ago. Additionally, the tax could dissuade homeowners from making property improvements that might push their home’s value into a higher tax band, negatively affecting builders and the construction sector.
Michael Bruce, CEO of estate agency Purplebricks, echoes these concerns, estimating that lowering the threshold to £1.5 million could affect an additional 150,000 households. He stresses that housing is a key driver of the UK economy and that discouraging market activity could have a domino effect on buyers, sellers, tradespeople, retailers, and the broader economy.
The proposed changes underscore broader worries that speculation around new property taxes may inadvertently suppress housing market activity, an outcome that policymakers should carefully weigh.