Healey Urged to Win Back Wealthy Investors After £541m Stamp Duty Slump

As Chancellor John Healey puts the finishing touches to his first Budget, one number he may wish to note is £541 million.

That’s the estimated loss in stamp duty revenue on property sales above £5 million in the 18 months following Rachel Reeves’ first Budget on 30 October 2024.

The figure is based on a comparison of sales in the 18 months before and after that date, which was when Reeves raised the second-home stamp duty surcharge to 5% from 3% and set out the replacement for the non-dom regime.

After adjusting for price movements, so the £5 million threshold means the same in both periods, the number of sales in England dropped by 14% to 2,208 from 2,569, data from Land Registry, LonRes and Knight Frank shows. Estimated stamp duty on those £5 million-plus sales fell 16% to £2.855 billion from £3.395 billion.

The estimates assume half of buyers paid both the second-home surcharge and the 2% overseas surcharge, both of which were applied evenly across all sales. An estimated £201 million more in stamp duty was collected in the second period due to the higher second-home surcharge. The £541 million is the net loss to the Treasury after taking this extra revenue into account.

Prime Headwinds

As well as a tougher policy landscape, prime UK markets have faced higher mortgage costs due to the Middle East conflict, which began in February.

Despite these headwinds, London had a comparatively positive summer, largely thanks to the absence of tax speculation ahead of next week’s Budget. September recorded the first period of quarterly price growth (+0.3%) in prime central London (PCL) for four years.

Transaction numbers also stabilised, falling by 2.5% in the year to September in PCL and prime outer London, which compared with a drop of 14% in March, Knight Frank data shows.

In the Country market, an area that covers a range of urban and rural properties above £750,000 outside London, average prices fell 4.2% in the year to September, which was a marginal improvement on the annual decline of 5% recorded in June. The number of exchanges was 2% lower in Q3 this year compared with last year, as we explore here.

The Visa Case

“The stamp duty loss is one of many indicators that show what happens when Britain is not competitive on a global stage in attracting overseas investors,” said Leslie Macleod-Miller, chief executive of Foreign Investors for Britain (FIFB), which is campaigning for a new investor visa. “Of course, it also grossly understates the wider loss to the country’s economy.”

The Chancellor is unlikely to cut stamp duty in next week’s Budget, but there has been speculation he may consider some form of visa to attract wealthy overseas investors after a string of high-profile departures, including hedge fund manager Chris Rokos.

I discussed the impact of the non-dom changes with James Quarmby, head of private wealth at law firm Stephenson Harwood, on a recent episode of Housing Unpacked. He estimates the new rules will cost the Exchequer up to £4 billion per year in overall lost tax revenue. That compares with a government estimate that they would raise close to £3 billion.

Flat-Rate Tax

One option reportedly on the table is an FIFB proposal for a global investor visa, which is based on a minimum investment of £2.5 million and an annual flat-rate tax of £200,000 for up to 15 years, with a route to indefinite leave to remain. FIFB estimates the plan could attract more than £225 billion of inward investment over a decade.

Reeves replaced non-dom status with a regime that exempts newcomers’ foreign income and gains from UK tax for their first four years of residence.

“Four years is simply not long enough, which is a message we have been giving to the government,” Macleod-Miller told Knight Frank. “The problem so far is the gap between what the government has said in relation to creating economic growth and what they have done.”

He is hopeful rather than confident that Healey will deliver something in keeping with his apparently more pro-entrepreneur stance at the Budget next week. It was reported this week, for example, that Healey would not increase capital gains tax, a topic discussed on a recent episode of Housing Unpacked with former Treasury special adviser James Nation.

“It’s very unlikely many people would have predicted a few weeks ago that he would not raise capital gains tax,” said Macleod-Miller. “Even if he announced a consultation on an investor visa, it would be a positive step. It’s heartening to see the Chancellor recognises that investors have choices.”