Family homes worth £1.5million could yet be stung by Rachel Reeves’ ‘mansion tax’, property owners were warned today.
At her Budget in November, the Chancellor announced a ‘high-value council tax surcharge’ in England on homes above £2million from April 2028.
The annual charge will come on top of existing council tax and will increase depending on the value of a property.
There will be four price bands – starting at £2,500-a-year for properties worth more than £2million and rising to £7,500 for properties worth more than £5million.
Homeowners in London and the South East are set to be hardest hit by the new levy – dubbed a ‘mansion tax’ – as this is where property prices are the highest.
Despite Ms Reeves targeting homes worth £2million and above, the Valuation Office warned on Tuesday that cheaper properties might still be dragged into the surcharge.
Jonathan Russell, chief executive of the Valuation Office, told MPs that his agency would undertake efforts to ‘make sure we’re not missing anything’.
He said this would mean likely checking the value of homes that currently have an ‘indicative value’ of £1.5million and upwards.
Appearing before the House of Commons’ Treasury Committee on Tuesday, Mr Russell said: ‘At the moment we deal with around about 400,000 council tax valuations a year, because people say their property has changed.
‘As a result of the introduction of the higher-value council tax surcharge, estimates are there will be about 150,000 to 200,000 properties in scope.
‘Obviously, the banding starts at £2million. Where we’ll look at to make sure we’re including properties that should be included we haven’t finalised it yet.
‘But we’ll probably look at houses that have an indicative value of £1.5million just to make sure we’re not missing anything.
‘And, obviously, if houses are clearly above the upper level, which is £5million, then we won’t spend too much time looking at those either.
‘We’ll be looking at the ones between those two levels to make sure we get the banding absolutely accurate.’
Mr Russell said the Valuation Office would follow its usual process for determining the value of homes.
‘We look at the property attribute data – location, bedroom number, size, type of house; detached, semi-detached,’ he added.
‘It’s how we do the valuation; it’s what we do.’
But he could not confirm if convents or retirement homes would be exempt from the surcharge, saying: ‘That’s still to be worked through – things like old people’s homes and convents: will they be included, or will they not?’
Senior Tory MP Sir James Cleverly, the shadow housing secretary, said: ‘Exactly as we predicted, Labour’s new family homes tax is expanding in scope to encompass more and more homes.
‘Before long, ordinary families will wake up to find their homes classed as ‘mansions’, and they have been slapped with a massive bill.
‘Under Labour, council tax is soaring across the board, with the average family in a B and D home facing a cumulative £1,143 council tax increase across this parliament.’
A Treasury spokesperson said: ‘The £2million band is not changing. The Valuation Office will carry out a valuation to identify any homes whose value has increased above the threshold.’
