19 September 2026 , 10:10
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Last November, the government announced it would implement an extra tax of between £2,500 and £7,500 a year on properties worth over £2 million. This was expected to impact around 134,000 homes.
Chancellor John Healey is now considering extending the tax to properties worth over £1.5 million, which would result in the number of properties impacted by the tax more than doubling to 271,000 homes, according to current values.
Lowering the threshold was described by two government sources as a “live discussion” in the Treasury, The Times reported.
The new chancellor is tasked with finding approximately £10 billion to balance the books in the upcoming October budget. It is believed that this proposal could generate £800 million a year for the Government.
An HMT spokesperson said: “As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”
This comes as the Tories prepared to warn Labour that it could not afford to raise taxes again after Rachel Reeves’s raids.
Shadow Chancellor Andrew Griffith will also urge the Government to take further steps to help small businesses and self-employed people by slashing tax compliance red tape.
The Prime Minister has warned that a difficult Budget is in store for Brits following inflation rising to 3.1%.
The Office for National Statistics (ONS) revealed that inflation accelerated to a five-month-high of 3.1% last month as higher fuel prices and airfares pushed up the cost-of-living for Britons.
Speaking after the results were published on Wednesday, Mr Burnham vowed to ensure the economy “remains on track”, but warned he is prepared to take “difficult decisions” to do so.
However, he insisted the Government “will not take risks with people’s living standards” in the Budget next month.
In his first major speech since being appointed shadow chancellor by Tory leader Kemi Badenoch at the end of August, Mr Griffith will say small businesses are taxed too highly, and claim that complying with the tax system is a form of tax in its own right.
Ahead of the speech, Mr Griffith said: “Labour are squeezing small businesses dry. They are taxing them too much and crushing them with a complex tax system that is working against them.
“Labour’s jobs tax and business rates raid have done immense damage, and their employer red tape has placed yet another burden on the shoulders of businesses.
“In addition to these costs, the average small business now spends more than a working week every year doing the Government’s paperwork.
“We need to cut taxes and make the tax system easier to navigate. Andy Burnham and John Healey must rule out tax rises at the Budget and pledge not to increase an exit tax or any other new taxes.
“Unlike Labour, the Conservatives are listening to business, and we are committed to making tax lower and simpler.”
During the speech, Mr Griffith will announce he has commissioned a taskforce to investigate how to reform the tax compliance system, with a view to reduce the burden faced by small businesses.
It will be led by Tory peer Lord Mackinlay of Richborough, the former South Thanet MP, and Robert Colvile, the outgoing director of the Centre for Policy Studies think tank.
Small businesses face a combined cost of £25 billion a year because of tax compliance, and business owners spend 44 hours a year on tax paperwork, the Federation of Small Businesses has previously estimated.
Lord Mackinlay said: “Small businesses and the self-employed are the backbone of the nation but have spent far too long being penalised by the state simply for wanting to just get things done.
“I’m honoured to work with the shadow chancellor to put this right for the millions of people up and down the country who are the main drivers of growth in the economy.”
Reform UK Treasury spokesman Robert Jenrick took aim at his former colleague Mr Griffith, and suggested his tenure as a Treasury minister under then-chancellor Kwasi Kwarteng in 2023 had led to tax administration becoming more complicated for small businesses.
Mr Jenrick said: “Andrew Griffith was the very person who abolished the office for tax simplification after the tax code ballooned to 23,000 pages – why on earth would anyone believe him now? After making IR35 worse, freezing VAT thresholds and imposing reams of red tape, businesses won’t forget the Tories’ betrayal.
“While the Tories still refuse to acknowledge the damage they caused, Reform UK has a fully costed plan to back Britain’s small businesses. We will raise the VAT registration threshold to £150,000, reverse Rachel Reeves’s jobs tax and strip away unnecessary EU regulations like GDPR that choke growth.
“Simply asking Labour not to raise taxes isn’t enough. Britain needs a radical change in direction not more hollow talk from a stale Tory opposition that had every opportunity to fix the system and failed.”
A Labour spokesperson said: “We won’t take any lectures from the Tories on the economy – not least when it was only last week that Andrew Griffith was praising the ‘lots of good things’ in Liz Truss’s disastrous mini-budget.
“The Chancellor is fully focused on his priorities: giving families and businesses breathing space, backing British jobs, and driving growth in every postcode, underpinned by a commitment to meet the fiscal rules.”
Prime Minister Andy Burnham has said he is prepared to take “difficult decisions” in the Budget next month after official figures showed another jump in inflation.
He added that the economy is still showing “resilience across the board”, linking to the inflation uptick to the war in the Middle East.
The official data comes amid warnings from economists that inflation will continue to swing higher over the coming months, with increases in interest rates also predicted.
Households are also expected to face another rise in their energy bills from next month, adding to pressure on consumer finances ahead of the autumn Budget.
The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation increased to 3.1% in August, compared with 2.9% in July.
It was in line with predictions from economists and points to an upward trajectory for inflation since striking a 15-month-low of 2.6% in June.
It therefore moved further away from the Bank of England’s 2% inflation target, ahead of the central bank’s latest interest rate decision on Thursday.
Many economists have suggested the Bank is still likely to keep interest rates – which help dictate mortgage and loan rates – at 3.75%, but that hikes are likely in future months.
Forecasts for higher inflation will increase pressure on the Government to consider measures to alleviate the rising cost of living in next month’s autumn Budget.
Andy Burnham said the Chancellor John Healey would use the “highest degree of prudence” on the economy, but also said he would look to protect living standards.
He said: “It is going to be challenging, because the picture around the world is challenging, particularly the situation in the Middle East, and we will look carefully at all those things.
“We won’t take risks with people’s living standards or with the economy as a whole, so we will take it all into account.
ONS chief economist Grant Fitzner said: “Sharp price rises for petrol and diesel pushed inflation up again in August.
“Higher airfares, particularly for long-haul journeys, also contributed to the increase.”
Motor fuels contributed significantly to the rise in inflation, after the average price of petrol rose by 9.1 pence per litre between July and August, to an average of 161.3 pence per litre.
The price of diesel rose by 14.2 pence per litre to an average of 181.8 pence per litre for the month.
The jump in fuel costs highlights the early impact of the breakdown of the US-Iran ceasefire in July, which led to a fresh uptick in oil and gas prices.
Elsewhere in the transport sector, the latest figures also showed a 6.2% increase in airfares for the month after an increase in the cost of long-haul flights.
Meanwhile, food and drink inflation remained steady at 1.3% despite warnings that it could be pushed higher by rising energy costs.
Chancellor John Healey said: “The war in the Middle East is impacting on inflation worldwide, not just here at home, in our bills, our weekly shop and at the petrol pumps.
“We have taken early action to help give families and businesses breathing space, by cutting tax on electricity bills, capping bus fares at £2 and lowering rates for pubs, social clubs and live music venues.
“Despite this serious global uncertainty, our UK economy is proving resilient, and our determination to deliver growth in every postcode continues.”
Households are expected to face further pressure from rising bills, with experts at Cornwall Insight predicting a 4% increase to bills from October 1, with an even sharper rise predicted in January.
Thomas Pugh, chief economist at RSM UK, said: “The rise in inflation in August is just the start of a new upward trend as higher energy, food and memory chip prices continue to make their way through supply chains.
“We now see inflation peaking at almost 4% in early 2027, before gradually dropping back to 2% in 2028.”
Martin Sartorius, lead economist at the CBI (Confederation of British Industry), said: “Given the limited signs of a pick-up in domestic price pressures, the Bank of England’s Monetary Policy Committee is likely to keep interest rates unchanged at its next meeting.
“However, the renewed rise in energy prices means that the committee will be increasingly alert to the risk of these costs feeding through to persistently elevated inflation.”
The data also showed that Consumer Price Index including Housing (CPIH), the ONS’s preferred measure of inflation, rose to 3.3% for August from 3.1% last month.
Meanwhile, Retail Prices Index (RPI) inflation rose to 3.4% from 3.2% in July.
Deputy Editor