Mansion Tax threshold reduction could expand property tax reach

The proposed Mansion Tax, scheduled for introduction in April 2028, may affect a much larger portion of the property market if the government lowers the threshold from £2 million to £1.5 million.

Tax advisory firm Blick Rothenberg warns that the tax could undergo ‘fiscal drag,’ where the lack of automatic indexation for property value thresholds allows rising house prices to pull more homes into the tax net over time. While properties are expected to be revalued every five years and charges will increase annually with the Consumer Prices Index, the thresholds themselves remain subject to the discretion of future governments.

Mark Cunningham, a partner at Blick Rothenberg, suggests that indexing thresholds to inflation could prevent the levy from evolving from a tax on exceptional properties into a mainstream property tax. Further details regarding the tax are expected to be released in Chancellor John Healey’s first Budget next week.