The UK Labour government is considering lowering the minimum value of homes subject to the luxury-property tax to £1.5 million, a move that could more than double the number of properties liable for the charge to about 271,000 homes, according to unnamed government sources.
The government had announced that the tax would apply to properties worth more than £2 million, with their owners required to pay additional annual charges ranging from £2,500 to £7,500.
Tax scope and expected revenue
Former Finance Minister Rachel Reeves announced the luxury-property tax last year, and it is expected to raise about £400 million a year for the UK Treasury after it takes effect in April 2028.
Pressure on public finances
The consideration of an expanded tax comes as the UK government faces pressure to raise additional revenue and improve the state of the public finances, amid concerns about its ability to achieve fiscal stability as borrowing costs rise.
Prime Minister Andy Burnham said earlier this week that the forthcoming budget would be difficult, given the repercussions of the conflict in the Middle East for the UK economy, particularly higher energy prices and the resulting increase in borrowing costs.
London hardest hit
The tax targets owners of Britain’s highest-value properties, with London homeowners expected to be among the groups most affected because of the capital’s high property prices. Hamptons estimates that about 88% of the properties expected to fall within the tax under the current threshold are located in London.
High house prices in some London neighbourhoods mean that relatively average-sized family homes could fall within the tax’s scope. Data compiled by the UK Office for National Statistics showed that the average house price in Kensington and Chelsea was about £1.25 million in September 2025.
