Chancellor Rachel Reeves is expected to announce a controversial property levy in the Budget that could affect residences valued from just £135,000, despite the measure being termed a “mansion tax”.

The proposed legislation would require revaluation of all properties in council tax bands F, G and H, representing one in ten homes across England.

Approximately 300,000 of the highest-value properties in these bands would face an extra charge on top of their current council tax bills.

The additional levy would be collected by HMRC rather than local councils. Homes above a certain value, potentially £1.5million or £2million, would be included, but the Treasury has not confirmed the exact threshold.

This uncertainty affects 2.4 million households whose properties fall within the relevant council tax bands.

Chris Ball, chief executive of Hoxton Wealth and a specialist in pensions, tax and inheritance planning, highlighted how unclear definitions could be a major barrier.

He said: “The problem is defining what a mansion is. The price of a mansion in one area could get you flat in London that is no bigger than a box because of where it’s located.”

He also questioned how the policy would be applied to elderly homeowners living on state pensions if their property was classified as a mansion.

He continued: “There needs to be very clear definitions of what that means and how are you going to tax that? Is it going to be linked to council tax rates that you’re going to have to pay an increased amount, because, if so, that’s not the direct taxation the government wants to get. And how could you enforce it?”

Property analytics firm PropertyData has highlighted huge regional differences that the proposal could create. Michael Dent from the company described an “astonishing” variation in values within Band F alone, which range from £135,000 to £2.9million.

He said: “If Rachel Reeves targets all Band F properties in her hastily assembled tax rise, it could lead to the unfair situation where modest Band F properties in northern England face revaluation and a potential surcharge, while million-pound Band E properties in London do not.”

Land Registry sales data shows Band F homes in Manchester and Solihull worth just £135,000, and similar Band F properties in Birmingham and Nottingham below £150,000. Meanwhile, a Band F home in north London is valued at £2.9million.

The disparity extends further, with Band E properties worth millions potentially avoiding the levy entirely. A Worcester home valued at £2.9million and an Arsenal property worth £2.1million would both escape revaluation under the current proposals, despite their substantial values exceeding many Band F properties elsewhere.

The council tax band system originated in 1991 when all properties in England and Wales received valuations and were allocated to one of eight categories.

No comprehensive national revaluation has occurred since, despite significant regional variations in property price growth over three decades.

Properties valued between £120,001 and £160,000 in 1991 were designated Band F. However, London’s property boom has created situations where Band F homes in the capital now vastly exceed the worth of equivalent northern properties from that era.

Michael Dent explained to This is Money that some properties have undergone modernisation and extensions, substantially increasing their value, whilst others remain unchanged since 1991, yet both pay identical council tax rates.

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He describes this as “unfair” given the dramatic differences in current market values.

David Edwards, a 72-year-old retired property specialist, expressed dismay that his Greater Manchester residence might be subject to assessment under the new levy.

The three-bedroom property, which he and his wife have occupied for a quarter-century, was valued at £400,000 last year – twice their original purchase price.

Despite its Band F classification potentially triggering evaluation, Edwards emphasised the property’s modest nature. “There’s no chicken coop, stable or swimming pool here. Our small three-bedroom house is definitely not a mansion,” he stated.

The pensioner highlighted their financial circumstances, noting: “We are not sitting on piles of wealth; we are pensioners with a modest income.”

His situation illustrates how the proposed levy could affect ordinary homeowners rather than exclusively targeting luxury property owners.

Mr Ball advised property owners to secure current valuations and assess their exposure if values approach discussed thresholds.

He recommended those contemplating sales consult advisers about timing, whilst cautioning that trust arrangements for tax planning present complexities including potential immediate tax implications and ongoing charges.