Chancellor Rachel Reeves is preparing to implement a £600million property surcharge that will impact approximately 300,000 homes across England’s highest council tax brackets.

The new levy will apply to properties in bands F, G and H, with middle-class households in London and the South East bearing the brunt of the additional charges.

Homeowners could face annual payments ranging from hundreds to thousands of pounds on top of their existing council tax obligations. Band F properties, which currently average £3,293 in council tax annually, may see hundreds of pounds added to their bills.

The most expensive properties could be hit with thousands of pounds in extra charges each year. The measure forms part of the Chancellor’s strategy to generate £40billion for public finances, following her decision to abandon previously considered income tax increases.

The Treasury intends to reassess 2.4 million properties in the upper council tax brackets over the coming years, representing roughly 10 per cent of English homes, The Telegraph reported.

Officials will establish a distinct charge separate from standard council tax bills, though uncertainty remains about precisely which properties will be affected. This ambiguity could potentially stall property market activity for years, according to industry experts.

Government data shows that 26 of England’s 296 local councils will have more than a quarter of their properties reassessed for council tax. More than 15 per cent of homes in London and the South East fall within the scope for possible tax increases.

Buckinghamshire is set to have over 65,000 higher-band properties reviewed. Around 59,000 homes in Westminster and 46,000 in Kensington and Chelsea will also be reassessed.

Overall, the plan affects around 1.3 million households currently in band F across England.

Ms Reeves had previously looked at raising income tax by 2p in the pound while cutting National Insurance by the same amount, a move expected to raise around £6billion.

However, the Office for Budget Responsibility later advised the Treasury that the plan would not bring in as much revenue as forecast.

Officials confirmed to the OBR on Wednesday that income tax rates will remain unchanged. The reversal triggered market turbulence on Friday, with government borrowing costs jumping -10-year gilt yields rose by 0.13 percentage points to 4.57 per cent – and the FTSE 100 fell by 1.1 per cent.

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The Chancellor still needs to find about £40billion through a mix of extra revenue and spending cuts. She is aiming to build a £15billion contingency reserve to guard against economic shocks, up from the current £9.9 billion buffer.

The OBR offered some limited relief by upgrading its borrowing cost forecasts, giving the Treasury an unexpected £1.7 billion improvement in the figures.

Sir Mel Stride, the shadow chancellor, condemned the proposals as “a class war against middle England”.

He stated: “If Starmer and Reeves decide to introduce a new tax raid on family homes, they will be punishing aspiration and hitting hard-working people.”

He added: “Under Labour, nothing is safe not your job, your home, your savings, or your pension.”

The Chancellor has pledged to implement “fair” decisions whilst targeting landlords, salary sacrifice arrangements and various asset holders. Gambling duties are also expected to increase.

England’s property tax framework relies on 1991 valuations, creating significant disparities.

Economists have highlighted the system’s regressive nature, where smaller properties often incur proportionally higher taxes than larger ones.

Buckingham Palace, classified as band H in Westminster, pays £2,034 annually – less than a typical three-bedroom semi-detached house in Kendal, Cumbria. London property values have significantly outpaced other regions since the original assessments.