Tens of thousands of homeowners could be hit by new council tax bands as Rachel Reeves sets her sights on higher-value homes

Tens of thousands of homeowners could be hit by new council tax bands as Treasury officials ponder targeting higher-value homes, The Mail on Sunday understands.

Affluent Londoners and those in the South East are expected to be the prime targets as Chancellor Rachel Reeves tries to find £42billion to balance Labour’s books.

Property experts believe new council tax bands for higher-valued properties – rather than a revaluation of all houses across the country – would appeal to the Treasury, boosting tax receipts by raising more cash from well-heeled homeowners.

It would allow Ms Reeves to skirt Housing Secretary Steve Reed’s promise not to revalue homes for council tax gains during this Parliament.

And new bands would provide a cash injection for local authorities and lower the need for them to go cap in hand to the Treasury for grants.

David Fell, lead analyst at estate agency Hamptons, said: ‘Adding a higher council tax band would probably be one of the fairer and least disruptive property tax reform ideas we’ve seen floated so far.’

The highest council tax level in England, Band H, applies to properties which were valued at £320,001 or more in 1991 – when they were last revalued.

Mr Fell said: ‘[This band] covers new-build, four-bedroom homes alongside 20,000 sq ft mega mansions worth many multiples more.’

A British property valued at £424,000 in 1991 is estimated, on average, to be worth more than £2.1 million today, figures from Nationwide show. But in London, where house prices have since exploded, such a property would be valued closer to £3 million in 2025.

Prime targets for tax band reforms include the elite London borough of Kensington and Chelsea, where the average home currently sells for £1.8million on Rightmove.

There is precedent for such a move – Wales added an additional council tax band in 2005 to cover properties worth £424,000 or more in 2003.

The news follows comments made by Ms Reeves last week that squeezing those with ‘broad shoulders’ would be a ‘part of the Budget story’. 

And fears remain that any council tax hikes will further pump the brakes on the spluttering property market. Sales of £5million-plus properties in Central London in September were down 40 per cent on last year.

A Treasury spokesman said: ‘The Budget will strike the right balance between making sure that we have enough money to fund our public services while ensuring we can bring growth to boost living standards.’