Almost a third of homes targeted by Reeves’s ‘mansion tax’ will be flats

Almost a third of the properties expected to be hit by Rachel Reeves’s planned £600m “mansion tax” are flats, new analysis suggests.

Around 100,000 apartments are likely to face a new surcharge – which will affect properties in the highest three council tax bands in England, according to estate agency Hamptons.

The types of flats affected are both apartments in new build towers with amenities such as concierges, gyms or swimming pools, as well as three or four-bedroom properties in converted townhouses or older buildings.

Tom Bill, head of UK residential research at Knight Frank, said: “The Treasury will be delighted that the term ‘mansion tax’ has caught on among Labour backbenchers, but it’s unlikely to reflect the reality on the ground for many homes.”

The Chancellor is preparing to announce an additional charge on the nation’s most valuable homes at next week’s Budget. The new tax will affect properties in council tax bands F, G and H, and is expected to hit around 300,000 properties, according to government insiders.

As part of the plan, officials are preparing to revalue the 2.4 million homes currently in the highest three council tax bands. In England, the tax is currently based on property values from 1991.

Hamptons looked at the 300,000 most expensive properties across the country based on their most recent sale prices.

The vast majority are already in the top three council tax bands, so likely to be covered by the revaluation. The estate agency’s analysis suggests that the surcharge would kick-in for properties sold for £1.5m or more.

Flats expected to be hit by the new surcharge are concentrated in areas of London such as Kensington and Chelsea, Westminster and Camden.

Several are in properties that have been converted into flats in recent years, according to David Fell, lead analyst at Hamptons.

Mr Fell said: “Where these flats were bought in the last decade, in many cases, these are homes that are no longer worth what their owners originally paid for them.”

Hamptons found more than nine in 10 of the 300,000 properties likely to be hit by are in London and the South East.

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Owners of the homes affected could also face council tax bills of more than £6,000 a year, according to Hamptons, with the extra bill from the surcharge averaging about £2,000 per year.

Separate analysis by Savills shows 44pc of all band H properties in England are in London, along with a quarter in band G and 22pc of band F. Collectively, 15.4pc of all homes in the capital fall into one of the top three council tax bands.

All properties across England are not expected to be revalued as part of the council tax review and Mr Bill said this raised issues about fairness.

He said: “There is also a question around band D and E properties being exempt but potentially worth more than those captured in the top three bands.

“The other issue is that more expensive properties are not easy to value as they tend to be less standardised. Overall it feels like the sort of policy that could get bogged down in litigation.”

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For houses rather than flats, the new surcharge is expected to hit the London areas of Wandsworth, Richmond and Barnet particularly hard, Hamptons said.

Sir Mel Stride, the shadow chancellor, called the planned surcharge “a class war against Middle England”.

“If Starmer and Reeves decide to introduce a new tax raid on flats and family homes, they will be punishing aspiration and hitting hard-working people,” said Sir Mel.

“Instead of raising taxes again, Rachel Reeves needs to get a grip on spending, including the welfare bill. It’s time Labour rewarded work, not those on welfare.”

Ms Reeves is expected to allow people to defer paying the surcharge until they die or move house to prevent asset-rich and cash-poor homeowners, such as pensioners, being forced to sell their homes to meet the cost.

However, the relief would effectively mean hitting families with another layer of inheritance tax when their loved ones die, on top of a required 40pc death duty.

A spokesman for The Treasury said: “We do not comment on tax speculation outside of fiscal events.”

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