£1.5m homes may be hit by Rachel Reeves’ mansion tax in biggest change in more than 30 years

Jonathan Russell, the chief executive of the Valuation Office Agency (VOA), said houses currently worth around £1.5 million would be reviewed to see if their value had climbed, putting them over the threshold.

It comes as Reeves announced in her budget in November that houses worth more than £2 million would be hit by a 'high-value council tax surcharge'.

The annual charge will come on top of existing council tax and will increase depending on the value of a property.

The revaluation is the biggest in more than 30 years and is expected to cover between 150,000 and 200,000 properties.

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The new 'mansion tax' will be divided into four bands based on a property’s value.

Owners of homes worth between £2 million and £2.5 million will face an annual surcharge of £2,500, rising to £7,500 for properties valued at more than £5 million.

Rachel Reeves said the measure had been introduced to address "a longstanding source of wealth inequality in our country”.

Appearing before the House of Commons Treasury Committee on Tuesday, Russell said they currently handle around 400,000 council tax revaluations each year, largely due to homeowners reporting changes to their properties.

He said: “As a result of the introduction of the higher-value council tax surcharge, we estimate that around 150,000 to 200,000 properties will fall within scope.

“Obviously, the banding begins at £2 million. Where we'll look at to make sure we're including properties that should be included we haven't finalised it yet."

He added that properties clearly above the upper threshold of £5 million would require less scrutiny and that the committee's focus will be on homes between those two levels to ensure the banding is applied as accurately as possible.

Russell said the Valuation Office would use its standard methodology to assess the value of homes.

He said: “We look at the property attribute data – location, number of bedrooms, size and type of property, whether detached or semi-detached."

However, he said it was not yet clear whether convents or retirement homes would be exempt from the surcharge.

Russell added: “That is still being worked through.

"Questions remain around properties such as care homes and convents – whether they will be included or not.”

The Office for Budget Responsibility said the measure would raise about £400 million a year by 2029-30.

James Cleverly, the shadow housing secretary, said: “Exactly as we predicted, Labour’s new family homes tax is expanding in scope to encompass more and more homes.

"Before long, ordinary families will wake up to find their homes classed as ‘mansions’, and they have been slapped with a massive bill.

“Under Labour, council tax is soaring across the board, with the average family in a Band D home facing a cumulative £1,143 council tax increase across this parliament.”