Sunak has drawn up plans to raise the threshold where buyers begin to pay stamp duty from £125,000 to £500,000, The Times reported.

The measure is expected to be a temporary change to the property tax, intended to kick start the country’s economic recovery.

Currently, the rate of stamp duty charged on the portion of the property purchase price that falls between £125,001 to £250,000 is 2%. The rate charged on the next £675,000 is 5%. Only first-time buyers are eligible for a zero rate of tax up to £300,000 and from £300,001 to £500,000 a rate of 5% is applied.

Property lenders say the extension to zero rate relief is a step in the right direction but the chancellor must go further to help homeowners at the top end of the housing market.

Tomer Aboody, director of property lender MT Finance, said: “The threshold for higher-end properties, £1m-plus, is still at extraordinarily high levels, which prevent many from selling or buying.

“While giving a stamp duty holiday at entry level, why not also reduce the higher-end stamp duty to previous levels where it was a set amount? This would allow, even for a short period, for the market to evolve, and for buyers to move up and down the ladder more easily. This, in turn, would stimulate the economy as people move, develop, refurbish, buy furniture – bringing in a lot of business across the board and boosting jobs.”

Aboody said a reduction in the higher end stamp duty rates would also help older buyers sell up and downsize without spending a large portion of their retirement income on stamp duty.

A survey from Audley Group, a retirement village developer, found that 38% of over 55s thought the most effective way of addressing the housing shortage was to provide greater support for people wanting to downsize. Some 34% wanted to see a reduction in stamp duty to help them carry out their plans to downsize.