Rachel Reeves Stamp Duty Receipts Fall by £541m as Luxury Property Sales Slump

Rachel Reeves’ stamp duty changes have come under renewed scrutiny after fresh property market analysis revealed an estimated £541 million fall in tax receipts from homes sold for more than £5 million, raising questions about whether higher property taxes have discouraged wealthy buyers and reduced revenue from Britain’s luxury housing market.

Research published by Knight Frank on 23 October 2026 found that sales of properties worth more than £5 million in England dropped by 14% during the 18 months following Reeves’ October 2024 Budget, compared with the preceding 18 months.

The findings come just days before Chancellor John Healey delivers his first Budget on 28 October, with pressure mounting on the government to restore investor confidence and encourage wealthy international buyers back into the British property market.

Reeves, who served as Chancellor between July 2024 and July 2026, increased the stamp duty surcharge on additional residential properties from 3% to 5% in her first Budget. She also announced changes to the non-domiciled tax regime, significantly altering the financial arrangements available to wealthy overseas residents.

The measures were intended to increase tax revenues and reform the treatment of wealthy property owners. However, the latest figures suggest that weaker activity at the top end of the housing market has outweighed the additional revenue generated by the higher surcharge.

According to Knight Frank’s analysis of Land Registry, LonRes and its own property market data, the number of transactions involving homes worth more than £5 million declined from 2,569 to 2,208 after adjusting for house price movements.

Estimated stamp duty receipts from those sales fell from approximately £3.395 billion to £2.855 billion, representing a reduction of around 16%.

Although the higher second-home surcharge generated an estimated additional £201 million, that increase was insufficient to compensate for the reduction in high-value property transactions. Knight Frank calculated a net decline of £541 million after accounting for the additional surcharge revenue.

These are industry estimates rather than a separately reported official Treasury revenue loss. The analysis also does not establish that the tax changes alone caused the decline, given the wider pressures affecting the housing market.

For buyers considering expensive London properties, however, the additional tax burden has become an increasingly significant financial consideration.

A buyer purchasing a £5 million additional property would face £100,000 more in stamp duty from the two-percentage-point surcharge increase alone, compared with the previous rate.

Adrian Anderson, director at mortgage brokerage Anderson Harris, described high stamp duty charges as “a barrier to entry” when discussing the reluctance of wealthy purchasers to commit to expensive property transactions.

Anderson told The Telegraph that stamp duty was often the sticking point for prospective clients looking to acquire high-value homes.

The problem is particularly significant in prime central London, where international investors, second-home purchasers and wealthy individuals have traditionally accounted for an important share of expensive property transactions.

Some potential buyers have increasingly considered renting instead of purchasing, avoiding substantial upfront tax payments while retaining greater flexibility.

Roarie Scarisbrick of buying agency Property Vision suggested that Britain’s treatment of international purchasers had damaged its competitiveness.

He said the UK “has not been a welcoming, appealing place for international friends”, arguing that discouraging overseas investment had not delivered the financial benefits policymakers might have expected.

Nevertheless, the downturn cannot be attributed entirely to stamp duty policy.

Higher borrowing costs, inflation, geopolitical uncertainty and changes in the financial circumstances of wealthy international households have also influenced activity across the luxury property market.

Mortgage costs have risen during 2026 amid inflationary pressures associated with the Middle East conflict, making expensive property purchases less attractive even for some affluent buyers.

The combination of increased acquisition costs and economic uncertainty has therefore created a difficult environment for sellers, estate agents and property developers dependent on high-value transactions.

There are signs that parts of the London market are beginning to stabilise.

Knight Frank reported quarterly price growth of 0.3% in prime central London in September, its first positive quarterly reading in four years.

Transactions across prime central and prime outer London were also down by just 2.5% in the year to September, compared with a 14% annual decline recorded in March.

Those figures suggest that underlying demand has not disappeared, although buyers remain sensitive to tax policy, mortgage costs and uncertainty surrounding future government decisions.

The implications could extend beyond property transactions themselves.

High-value home purchases frequently generate additional spending on renovation, professional services, interior design, construction and property management.

A sustained reduction in luxury housing transactions could consequently affect a broader network of businesses serving wealthy homeowners, although Knight Frank’s £541 million calculation measures estimated stamp duty receipts rather than those wider economic effects.

Pressure Builds Ahead of John Healey’s October Budget

The research has intensified calls for the government to reconsider its approach to wealthy international investors ahead of the 28 October Budget.

Leslie Macleod-Miller, chief executive of Foreign Investors for Britain, argued that the stamp duty figures illustrated Britain’s difficulties in competing for international capital.

He warned that the estimated tax shortfall “also grossly understates the wider loss to the country’s economy”.

His organisation has been campaigning for a new investor visa designed to encourage wealthy individuals to establish stronger financial connections with the UK.

One proposal involves a minimum investment of £2.5 million and an annual flat-rate tax payment of £200,000 for up to 15 years, alongside a potential route to permanent residence.

Foreign Investors for Britain estimates that such a scheme could attract more than £225 billion in inward investment over a decade, although that remains the organisation’s projection rather than an independently established outcome.

The debate also reflects continuing concerns about the replacement of the UK’s former non-dom tax arrangements.

Under the revised system introduced following Reeves’ Budget, qualifying new residents can benefit from relief on foreign income and gains during their first four years of UK tax residence.

Macleod-Miller criticised the duration of that arrangement, saying “Four years is simply not long enough”.

Meanwhile, James Quarmby, head of private wealth at law firm Stephenson Harwood, has estimated that the wider non-dom reforms could ultimately cost the Exchequer as much as £4 billion annually in lost tax revenue.

That assessment differs sharply from government estimates that the changes would generate additional revenue of close to £3 billion. Both figures are forecasts or estimates and should not be treated as confirmed financial outcomes.

The latest official figures also show why the distinction between luxury property receipts and overall stamp tax revenue matters.

HMRC reported on 21 October that total stamp tax receipts for April to September 2026 reached £10.1 billion, approximately £200 million higher than during the corresponding period in 2025.

The broader category includes taxes beyond the specific £5 million-plus residential property market examined by Knight Frank.

Consequently, the £541 million estimated decline does not mean all UK stamp duty or stamp tax revenues have fallen by the same amount.

Nevertheless, the Office for National Statistics reported that stamp duties were £1.5 billion below the Office for Budget Responsibility’s forecast during the first six months of the 2026–27 financial year.

With public sector borrowing reaching £97.8 billion during that period, £6 billion above official forecasts, the government faces growing pressure to protect revenue while supporting economic activity.

The property figures therefore present a difficult policy question for Healey.

Increasing taxes on expensive properties can raise more money from each completed transaction, but excessively high transaction costs may encourage buyers to delay purchases, negotiate lower prices or consider alternative locations.

Reducing those costs, on the other hand, could stimulate activity but would not automatically guarantee that the Treasury would recover any revenue lost through lower tax rates.

The outcome depends on how strongly buyers respond and whether additional transactions are sufficient to offset the reduction in tax charged on individual purchases.

The Treasury has maintained that taxation decisions will be announced through formal fiscal events rather than in response to speculation ahead of the Budget.

For now, no stamp duty reduction has been confirmed for 28 October.

The latest £541 million estimate nevertheless adds to the debate over whether the UK’s property tax system is delivering the balance between revenue generation and international competitiveness that policymakers intended.

For London’s luxury property market, the next Budget could prove important in determining whether the recent signs of stabilisation develop into a sustained recovery or whether uncertainty continues to weigh on major property purchases.