Labour to only tax homes worth over £2m

The party would only apply the mansion tax to properties worth over £2m if it wins power in next May’s election

Ed Balls announced that properties worth between £2m and £3m would be levied an extra £250 a month. The proposed tax is designed to raise £1.2bn a year (Alamy)

Labour has moved to reassure people with homes worth between £1m and £2m that they would not be dragged into the mansion tax the party would impose if it wins power in next May’s election.

Ed Balls, the shadow Chancellor, announced that someone with a property worth between £2m and £3m would pay an extra £250 a month – doubling the average council tax bill for homes in the top band. He said owners of properties worth tens of millions would make “a much bigger contribution” and that Labour will consider making overseas owners with second homes in the UK pay an extra amount.

Mr Balls said the threshold at which the tax kicked in would rise in line with the price of homes costing more than £2m to stop less expensive properties being caught in future. There had been claims that homes worth £1m could be sucked in.

Labour also promised that people with an income of less than £42,000 a year would be able to defer payment of the new tax until they sold their home or died. This follows criticism that poor pensioners living in expensive homes would be hit.

The proposed tax is designed to raise £1.2bn a year, which Labour would inject into the NHS.

The Tories claimed that Labour’s policy was “in chaos”. Priti Patel, a Treasury minister, said: “It’s barely a month old, yet Labour’s NHS promise as completely unravelled. This panicked change in policy shows the Ed Miliband and Ed Balls homes tax won’t raise the money they say it will.”

Tonight Mr Miliband carried out a mini-reshuffle in which he promoted Pat McFadden, a Blairite, from the backbenches to become shadow Europe Minister. Gareth Thomas moved from the Europe post to cover the Middle East and North Africa. Ian Lucas switched from foreign affairs to defence. Yvonne Fovargue moved from defence to education, replacing Rushanara Ali, who resigned last month after refusing to vote in the Commons for air strikes against Isis in Iraq.

Mr McFadden said: “I want to make the hard-headed, patriotic case for both Britain in Europe and for change in Europe so that it works for working people. Labour believes that Europe can and must be made to work better for Britain but we understand that the right road for Britain is change in Europe, not exit from Europe.”