UK Property: Non-Dom Tax Reforms Create Stamp Duty “Black Hole”

Knight Frank has estimated that recent reforms to the UK’s non-dom tax regime have created a £401mn “black hole” in stamp duty receipts – as a sharp fall in £5mn-plus property transactions dents Treasury revenues.

The figure, based on a study by the firm’s analytics team, is among the first to show the real-world fiscal impact of scrapping the long-standing non-dom system, which previously allowed international residents to live in the UK without paying tax on overseas wealth.

Since the changes were announced by Chancellor Jeremy Hunt in March 2024, there has been a 14% drop in £5mn-plus sales across the capital, according to Knight Frank and LonRes data – a decline that analysts say is now feeding directly into government finances.

Using transaction trends from the previous two years as a benchmark, the agency’s James Culley calculated the potential lost revenue by assuming all deals were subject to the top rate of stamp duty, with half incurring the additional 2% non-resident surcharge.

For context, HMRC collected £11.6bn in SDLT during the 2023/24 fiscal year. A £401mn dip may only account for around 4% of the Chancellor’s £9.9bn fiscal “headroom”, but it lands at a pretty sensitive moment – with public borrowing surging and the OBR expected to revise down its economic outlook in July.