Barnet homes face new 'mansion tax' if threshold lowered

More than 3,000 homes in Barnet could become subject to the 'mansion tax' if the government reduces the property value threshold for the levy. Analysis by Tax Policy Associates indicates that 3,294 additional properties in the borough would fall under the tax if the threshold is lowered from its current level to £1.5 million.

Potential impact on London

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The proposed change is under consideration by the Treasury as part of discussions leading up to the Budget on October 28. Experts estimate that across London, nearly 62,000 more homeowners could be compelled to pay the tax. This would result in an estimated additional £154 million in revenue for the capital. In total, 144,104 homes within London could be subject to the levy, generating a combined £624 million.

The original plans, introduced by former Chancellor Rachel Reeves, applied to properties valued over £2 million and were set to impose annual charges ranging from £2,500 to £7,500 from April 2028. If the threshold is reduced to £1.5 million, the number of properties liable for the tax nationwide would rise significantly. Tax Policy Associates projects that the total number of homes charged would increase from approximately 123,000 to around 245,000.

Treasury considerations

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The Treasury is reportedly exploring various scenarios to increase revenue. Experts suggest that rather than simply lowering the threshold, reforms to the levy itself might be implemented. Such reforms could involve increasing charges for higher-value properties and introducing new bands. For instance, properties valued between £1.5 million and £2 million could face a £2,500 annual charge, with escalating rates for higher values, potentially reaching a new top levy of £10,000 for properties over £5 million. This approach could, according to Tax Policy Associates, roughly double the net revenue to about £800 million, accounting for avoidance measures and administrative costs.

Other London boroughs expected to see a substantial increase in properties liable for the tax include Hammersmith and Fulham, which could see an additional 7,324 homes affected, and Wandsworth, with a further 6,526 homes potentially impacted. Kensington and Chelsea could experience an increase of 5,146 properties, Westminster 4,739, and Camden 4,649.

What happens next

The government has not officially commented on speculation regarding potential tax increases. The final decisions on any changes to the 'mansion tax' threshold or structure will be announced as part of the upcoming Budget on October 28.