Families face council tax bills of up to £10,000 a year under plans being considered by Rachel Reeves to double rates on more than a million homes.
The Chancellor is said to be looking at proposals to apply a 100 per cent increase to the two highest council tax bands, which would predominantly hit households in London and the South East.
On Saturday night, critics warned that many pensioners, who live on fixed incomes, would be unable to afford such steep increases and would end up “forced out of their homes”.
It comes with Ms Reeves understood to be considering a capital gains tax raid on inherited assets, including property, as well an exit tax on entrepreneurs fleeing Britain.
On top of this, The Telegraph can reveal she wants to restrict benefit claimants’ access to luxury cars, in what will be seen as a bid to demonstrate her commitment to spending cuts and soften the blow on tax rises.
The Chancellor must find £30bn to fill a black hole in the public finances ahead of her Budget at the end of the month and is said to view increases to council tax as one of the easiest ways to raise funds.
One option said to be under consideration is a proposal by the Institute for Fiscal Studies, which would involve doubling rates for properties in the top bands G and H.
The plans would see a typical bill rise from £3,800 to £7,600 for residents of a band G household, and from £4,560 a year to £9,120 for those in a band H home.
The most expensive council tax bill in the country would be in Rutland, where the top level of band H charge would rise to an eye-watering £10,800 a year.
In a pre-budget report, the influential think tank said the plan would net £4.2bn a year by the end of the decade for cash-strapped councils.
The blueprint may prove attractive to Ms Reeves, who has made no secret of her plans to target wealth at the budget, as it would hit just 4.1 per cent of households.
On Saturday night, the Treasury did not deny that the plan was under consideration. A spokesman said: “We do not comment on speculation around changes to tax outside of fiscal events.”
Unlike other reforms, such as introducing new bands on top of the existing ones, it would also avoid the need for a full revaluation of all homes in England.
A revaluation would be likely to take several years and would be more politically controversial as many more families would be dragged into higher tax.
A source familiar with the proposal told the Financial Times: “The idea of increased taxation on high-end homes is well established. The discussion is about how you do it.”
Others close to the Budget preparations said that the “administrative simplicity” of any changes was important to the Chancellor, appearing to rule out a country-wide revaluation.
Kemi Badenoch, the Tory leader, warned that the proposals would “hammer” pensioners in more valuable properties who live on fixed incomes.
She told The Telegraph: “Last year Rachel Reeves promised she wouldn’t be back for more taxes. Shamefully, she looks on course to break that promise.
“Creating new higher council tax bands will hammer people who have lived in the same house for decades, particularly pensioners, some of whom will be unable to pay this new tax and be forced out of their home.
“Instead of putting new taxes on family homes, she should be removing them, as I have said I would do by abolishing stamp duty.
“The Conservatives have a serious, costed plan to cut spending by £47bn and use half to pay down the deficit and half to get our economy growing.
“If Keir Starmer had any backbone, he’d tell his weak Chancellor to steal our savings package, cut tax and get Britain working again.”
Nigel Farage, the Reform UK leader, told The Telegraph the raid would be another “attack on aspiration” at a time when higher income families face a huge tax burden.
“It is an assault on assets and will cause huge consternation amongst older people living in properties they bought many years ago,” he said.
The Telegraph revealed in August that the Chancellor has quietly dropped Labour’s commitment, made before the election, not to change council tax bands.
Another option that could be considered is adding one or more extra bands to the top of the existing structure, as the Welsh Labour Government has done.
To avoid the need for a revaluation, the top half of the most valuable homes in band H, and potentially band G too, would be moved into a new higher band.
Homes placed into those higher bands would then be charged a higher rate, with Wales increasing charges for families in its new band “I” by 17 per cent.
That approach has previously been mooted by the Resolution Foundation, a think tank which has four former economists working on the Budget preparations.
Official figures show that any raid on the top two bands would overwhelmingly affect families in London and the South East while sparing those in the North.
There are just under 154,000 properties in the top band H across England, just under two-thirds of which are located in the capital and surrounding counties.
In contrast, there are only 1,560 in the North East and 3,450 in the East Midlands.
Of the 908,500 band G properties across the country, half are in London and the South East, compared with only 122,000 across the whole of the North.
On Saturday night, experts told The Telegraph that the move would affect older homeowners and could lead to a surge of properties coming onto the market.
Lucian Cook, of estate agency Savills, told The Telegraph that asset-rich, cash-poor households – such as pensioners – would be “at the sharp end of this” policy.
He said that families that had lived in properties for a long period of time would have “seen their assets go up in value, but that doesn’t mean they can be considered to be wealthy”.
Richard Donnell, of Zoopla, said the policy risks leading to houses flooding the market.
“Changes in council tax would likely see some homeowners look to sell to reduce costs, which would further add to supply and impact prices,” he explained.
He also warned that it was not possible to “assess the income of those who own or live in higher value homes”, and therefore assess their ability to pay more.
Other experts added that retirees “don’t have the pension provision to cover costs of living these days, so higher taxes on them, whether this be on their pensions, on their homes, on what they buy, could be the straw that breaks the camel’s back for some”.
The experts said: “This leaves them two main options, selling those assets and realising some of the capital, or taking debt on their assets to sustain them.”
Ms Reeves will not take a final decision on which tax rises to pursue until after Nov 21, when the Office for Budget Responsibility hands her its last pre-budget forecast of the public finances.