Healey has ruled out widening Labour’s so-called mansion tax to cover homes valued at £1.5 million, offering relief to thousands of middle-class homeowners across London.
The Chancellor had been urged to lower the threshold of the council tax surcharge amid pressure on the Treasury to find additional revenue for cost of living support.
Former chancellor Rachel Reeves originally announced the tax on homes worth more than £2 million, a measure that will not come into force until 2028.
Estate agents have already warned that the planned surcharge is distorting the housing market, even before a single payment has been collected.
Under current plans, owners of homes worth between £2 million and £2.5 million will face a £2,500 annual charge, rising to £7,500 for properties valued at £5 million or more.
Healey’s decision to rule out the lower threshold was reported by both the Sunday Times and the Financial Times, drawing an immediate reaction from across the housing sector.
Expanding the surcharge to £1.5 million homes would have effectively doubled the number of London properties caught by the levy, according to analysis by City AM.
While the threshold reduction would have been just 25 per cent, it could have tripled the number of suburban London homes subject to the tax, pulling in properties well beyond the most luxurious addresses.
“Lowering the threshold for the proposed high-value property surcharge will have a wider effect on the capital’s homeowners than the label of a ‘mansion tax’ suggests,” said Adam French, head of consumer finance at Moneyfacts.
Shadow Chancellor Andrew Griffith has been among the most vocal critics of the measure, with the Conservative party having pledged to exempt family homes from inheritance tax.
“A so-called ‘mansion’ tax is a tax on family homes and could hit hundreds of thousands of people, especially in London and the South East, through no fault of their own,” Griffith previously said.
Reform UK also weighed in when asked by property experts Knight Frank whether a Reform government would abolish the surcharge entirely, with a party spokesperson saying it was “against new taxes imposed without a mandate.”
The spokesperson added: “As far as we are aware, a mansion tax was not in Labour’s 2024 manifesto.”
Labour candidate Sagal Abdi-Wali, ahead of her victory at the Holborn and St Pancras by-election, acknowledged that some Londoners who do not feel wealthy could still face the charge.
She told the Standard: “I understand that there are some homes here that are a certain level of price where people don’t necessarily feel rich and there would be a pressure on them.”
A Treasury spokesperson maintained that “decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”