The Chancellor is reportedly mulling over a new 'mansion tax' ahead of the Budget on 26 November.

Under the proposals, revealed by the Mail on Sunday, owners of £2million-plus homes would face a charge of 1 per cent on anything over that amount. 

Chancellor Rachel Reeves is in a desperate hunt for more tax revenue as she scrambles to close the Government's fiscal black hole.

Official figures show public borrowing reached £20.2 billion in September, the highest for that month in five years. 

It brings total borrowing for the first half of the fiscal year to nearly £100 billion, significantly above the Office for Budget Responsibility's forecasts.

The potential mansion tax is the latest in a long line of property taxes that are reportedly being considered ahead of the Budget.

We look at what's being considered, how it would work and how much it could raise for the Treasury.  

What would a mansion tax mean?

There are roughly 160,000 homes in the UK worth £2million or over, according to Zoopla. This equates to 0.6 per cent of all homes. 

The 1 per cent annual levy would mean owners of a £3million property would face a bill of £10,000 every year.

Meanwhile, those living in a home valued at £5million would face a bill of £30,000 a year.

It's worth pointing out that the levy would only impact the amount by which the property exceeds £2million. Any homes worth less than this would not be impacted.

Some property experts think the tax would be unfair on those living in expensive parts of the country who have worked hard to afford a nice home. 

Property expert and buying agent Henry Sherwood says: 'This is not a wealth tax, it is an attack on anyone who has worked hard to be successful. 

'Between £2m and £3m in many areas of London buys a fairly standard Victorian terraced house, so it is hardly targeting the rich and wealthy. 

'These are people that have performed at school, been to University, got good jobs and worked on their careers. 

'Equally, it affects entrepreneurs and business owners, who took a different route, and shouldered huge risks to get where they are.'

Pete Mugleston, mortgage advisor and managing director at Online Mortgage Advisor says these are significant that will put off many would-be buyers in the future.

He says: 'This is essentially a wealth tax in disguise. Once you start taxing wealth, there’s nothing to stop future governments from going further. 

'A 1 per cent levy on a £5 million home could mean an annual £30,000 bill, which is hardly trivial. 

'It’s impractical, costly to enforce, and risks driving wealth, investment, and talent out of the country at a time when Britain needs to attract it.'

How much could it raise for the Treasury? 

The proposal would be similar to the Liberal Democrats' policy in the 2010 general election, and could raise between £2billion and £3billion for the Exchequer. 

What would it mean for the housing market?

Activity in the housing market has slowed down in recent months, due to buyers' worried about the economy and changes that might happen in the Budget. 

The usual pre-Christmas slowdown has begun six to eight weeks earlier than normal, according to Zoopla.

The property portal says uncertainty surrounding November's Budget is causing many home buyers to adopt a 'wait and see' strategy. 

The market for expensive homes has already been hit particularly hard by this, data suggests.  

Estate agent Savills says that in the high end country house market, including plenty of homes worth more than £2million, values are down 8.1 per cent on the year.

Frances McDonald, director of research at Savills, says: 'Over the past year, country and coastal markets have been challenged with ongoing concerns around council tax reform, and now face fresh speculation around additional taxation, placing downward pressure on pricing.' 

'The market, particularly above £3 million, is adjusting to a smaller pool of active and committed buyers.'

Mark Harris, chief executive of mortgage broker SPF Private Clients, added that Budget speculation had acted as a 'handbrake', with potential home movers deferring decisions.

Older people could be disproportionately hit 

Concerns have also been raised that older people who don't have a huge income, but have benefited from house price rises over many decades, could be penalised by the policy. 

Jeremy Leaf, an estate agent and a former Rics residential chairman, says:

He says: 'A fair proportion of those asset-rich, cash-poor older people may feel forced to move at a time when it doesn’t suit them and may be distressing or difficult to do.'

Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says that this tax would negatively impact the market in London.

"In areas such as East Sheen and Richmond, £2 million doesn’t necessarily buy a mansion - it buys an ordinary family home,' says Reynolds. 

'A so-called "mansion tax" would unfairly penalise people who are property-rich but cash-poor. 

'Many long-term owners here have simply benefited from rising property values over decades, not from high incomes.

'An annual charge based on property value rather than income would hit retired homeowners and families already stretched by high living costs, and could even force some to sell their homes just to pay the bill.'

How easy would it be to implement?

Much like with a general wealth tax, implementing a mansion tax could be challenging for the Government. 

The problem with valuing homes that have not actually sold is that it assumes value, without a buyer being in place to justify it.

Affected homeowners will no doubt challenge any Government valuations, which could also prove costly to administrate.

Such a tax is likely to also have a negative impact on house prices above £2million, meaning initial valuations could quickly become redundant.

Louis Mason, communications director at Oportfolio Mortgages thinks this form of tax would almost certainly lead to disputes.

He says: 'The UK doesn’t have a system for valuing homes at scale, so disputes would be inevitable. 

'In the short term it could dampen high-end transactions and deter international buyers, though over time prices would likely settle at levels reflecting the ongoing tax burden.'

Eamonn Prendergast, chartered financial adviser at Palantir Financial Planning Ltd also thinks such a tax would backfire.

'Valuations would be contentious and costly to enforce, especially for homes hovering near the threshold,' says Prendergast.

'Rather than raising stable long-term revenue, this could undermine confidence in the UK property market and discourage investment at a time when growth and stability are needed most.'

What else could change at the Budget? 

There are several options open to Reeves when it comes to hiking property taxes. 

These include replacing stamp duty with a new annual property tax on homes worth more than £500,000; a capital gains tax which kicks in when homes worth £1.5million or more are sold and an additional tax raid on landlords.