Higher council tax bills on cards for owners of homes worth more than £1m

Nick Clegg listens to a speech at conference in Brighton with Lib Dem colleagues Vince Cable and Danny Alexander (Getty Images)

People with homes worth more than £1m face a rise in their council tax bills as the Coalition Government considers new taxes on wealth.

The idea will be pushed by the Liberal Democrats when George Osborne, the Chancellor, tables his demands for more spending cuts.

Nick Clegg will demand two or three new council tax bands at the top of the scale as an alternative to the Liberal Democrats' favoured mansion tax on homes worth more than £2m, which David Cameron has blocked. Senior Liberal Democrats suggested that the council tax plan could target the same householders as would be affected by a mansion tax.

Mr Osborne is said to be open-minded about the new proposals, while Mr Cameron is more cautious. A senior Liberal Democrat source told i: "A mansion tax remains our top priority.

"We have not been able to persuade the Conservatives of its merits but we will continue to make the case for it," the source added.

"However, we believe the best type of wealth tax is one that targets high-end property because it would be difficult to avoid."

The eight bands on which council tax is based in England – from band A (up to £40,000) to band H (over £320,000) – have not changed since 1991 even though property prices have risen sharply. This means that all homes worth more than £320,000 in 1991 pay the same council tax in their local authority area.

Liberal Democrats point out that higher bands could be added at the top of the scale without a time-consuming revaluation of all properties, which would be politically sensitive in the run-up to an election.

The Deputy Prime Minister said yesterday: "I don't think it's right that someone in a £4m palace in the middle of London pays the same council tax as someone in a four-bedroom family home elsewhere."

A senior Liberal Democrat source said: "It's very odd that people who have been lucky enough to be able to buy a large house enjoy a freeze, just as people who have a very small property. We have the building blocks in place to do something on property – obviously they would fall short of a mansion tax, but it would still be a move towards it."

Lord Oakeshott will propose an amendment today, saying a mansion tax should remain the Liberal Democrats' top priority "as a first step towards wealth taxation designed to reduce inequality".