Houses worth more than £2m will face a hike in Stamp Duty to 7%, in a move designed to create £1.5bn in extra revenue.
Currently, all properties sold for more than £1m incur a 5% levy.
Sue Foxley, head of research at Cluttons, says a 7% Stamp Duty level would hit Londoners hard.
She says: “There is a massive shortage of family homes in London’s villages and given price growth expectation, growing demand will push average three and four bedroom family homes in many areas such as Islington into the top Stamp Duty tier within a year or two, making it even harder for families to commit to staying in the city.
“There will certainly be a rise in the number of people looking for a renovation project priced beneath £2m, preferring to spend their money on improving their home and potentially getting it back when they sell, rather than handing an additional 2% over to the Treasury.”
The chancellor is also thought to be planning to close a number of loopholes which allow Stamp Duty to be avoided by purchasing the house through an offshore company or by exploiting rules put in place to stop developers paying Stamp Duty twice.
Other measures include cutting the top rate of income tax from 50p to 45p from April 2013.
The income tax personal allowance is also set to rise £9,205 in April 2013 and then to £10,000 by April 2014 – a year earlier than previously expected.
Mortgage Strategy will be providing online news and analysis of the Budget from 12.30pm today.
You can also follow us on Twitter at @MortgageStrat.