Properties valued at £2 million or higher will face a “mansion tax” from April 2028.

The move was announced by former chancellor Rachel Reeves in her Budget last year and there has been much speculation about whether her replacement, John Healey, will expand the scheme.

Mr Healey was reportedly proposing to reduce the threshold of the levy to properties worth £1.5 million.

But following warnings from Labour MPs about the impact it would have on families in the capital, it is understood the Chancellor is reconsidering the plan.

The Government has argued the surcharge is expected to raise over £400 million by 2031 and will be charged on less than the top one per cent of properties.

However, the new tax will disproportionately target homeowners in London, where two thirds of qualifying transactions happened last year alone.

Owners of properties identified as being valued at over £2 million by the Valuation Office (in 2026 prices) will be liable for the annual surcharge.

There are currently about 145,000 UK homes valued at more than £2 million according to Savills but Knight Frank estimates that number will rise to 190,000 by 2028.

All but one of the top 20 constituencies that would be most affected by the tax are in the capital, according to analysis by estate agency Hamptons.

Fifteen of the seats are held by Labour MPs, including Kensington & Chelsea which would be the most impacted area in the country.

There will be four price bands.

The surcharge will rise from £2,500 for a property valued in the lowest £2 million to £2.5 million band to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year.

It has been estimated that the average surcharge will be around £4,000.

Council tax bands were introduced in 1992, with properties placed in different bands depending on their perceived value then.

Prices in London have escalated wildly over the last 30 years in areas which were not deemed in high demand, fashionable or expensive in the early 1990s, such as Hackney and Waltham Forest.

It is thought those properties in the most expensive bands, F, G and H will be caught by the tax which equates to 600,000 homes in London, according to research carried out for the London Standard.

However, a revaluation overhaul would have to follow at some point to capture those properties bought for less than £2 million but which have undergone renovation work to take them over the threshold.

Four London councils have blasted the mansion tax - claiming it is worse than the 1696 property tax which saw residents bricking up their windows.

Wandsworth, Kensington & Chelsea, Westminster, and Richmond town halls wrote to the Chancellor last year urging him to reverse the planned levy.

They say their residents will hand over £270 million each year under the plans - more than half of the £400 million which the OBR expects to be raised.

“This is a badly thought-out policy: one with limited revenue-raising ability, high implementation costs and a hugely disproportionate impact on our residents,” the letter from the local authority states.

Peter Graham, Wandsworth’s cabinet member for finance, said: “This is the most badly designed tax on properties since the one on windows, 330 years ago.”

The window tax of 1696 saw homeowners across England charged based on the number of windows their properties had.

People board up windows and even ventilation gaps in a bit to avoid the levy - posing and health risk to residents, while the tax led to higher rents as owners passed on the extra cost to tenants.

Kensington & Chelsea, Wandsworth and Westminster residents, as well as those living in Hammersmith & Fulham and the City of London also face huge hikes to their council tax bills next year after the Government slashed their funding.

Wandsworth council has already confirmed bills will go up by almost 100 per cent.

Dominic Agace, chief executive of Winkworth, called the levy a terrace tax, not a mansion tax.

He said: “Many £2 million plus properties are likely to be terraced family homes. There is a danger that more uncertainty will be the result of this move, with delays on the revaluations inevitable.

“Many people living in London in £2 million plus homes are those who are leveraged with large mortgages or those with their property as their only asset and living on a small retirement income.”