Chancellor John Healey Weighs Mansion Tax Expansion and Pension Levy

Chancellor John Healey is considering lowering the threshold for the High Value Council Tax Surcharge, commonly known as the mansion tax, from 2 million pounds to 1.5 million pounds. If implemented, the move would more than double the number of affected properties in England to between 270,000 and 300,000, primarily in London and the south-east. The surcharge, scheduled for April 2028, imposes annual charges between 2,500 and 7,500 pounds and could generate approximately 800 million pounds annually.

This proposal comes as the Treasury seeks 10 billion pounds to balance the October 28 budget following increased borrowing costs linked to the war in Iran. Prime Minister Andy Burnham has signaled a willingness to increase levies on the wealthy to fund cost-of-living measures. However, councils in Wandsworth, Westminster, Richmond, and the Royal Borough of Kensington and Chelsea have condemned the plan, arguing it unfairly penalizes middle-class families.

Separately, Healey will implement a tax increase in April 2027 that subjects unused pension pots to inheritance tax, a policy originally announced by former Chancellor Rachel Reeves. The levy is projected to generate 640 million pounds initially, rising to 1.46 billion pounds annually by 2029-30. Financial advisory firm Quilter reports that the policy is already altering retiree behavior, with many planning to increase lifetime spending or gifting to relatives to reduce their taxable estates.