Repeated increases in stamp duty have taken a heavy toll on high-end London property sales, with transactions in Britain’s two most expensive boroughs falling by 42 per cent over the past decade.
According to new analysis by Savills, deals in Kensington and Chelsea and Westminster have slumped from 10,665 in 2013–14 to around 6,200 in 2023–24.
The figures also provide a warning sign for Rachel Reeves as punitive stamp duty rates risk reducing overall tax receipts. Savills data suggests that the average effective stamp duty rate in these prime boroughs has almost doubled over the past ten years, from 5.4 per cent in 2013–14 to 10.1 per cent in 2023–24.
It is a stark illustration of the so-called Laffer curve in action. Conceived by the American economist Arthur Laffer, this curve suggests that, while higher tax rates can increase revenues initially, beyond a certain threshold receipts start to drop as taxpayers alter their behaviour or exit the market. Lucian Cook, the Savills director behind the analysis, said: “They can only push things so far without having a detrimental impact on tax revenues.”
George Osborne, then Chancellor, set the trend in 2014 by raising rates on higher-priced homes. Subsequent surcharges for second homes (introduced in 2016) and for foreign buyers (added in 2021) compounded the impact on prime central London. These measures have resulted in a staggering stamp duty bill. A UK resident purchasing a £10m main home in 2023–24 would face charges of around £1.1m in duty, rising to £1.8m for an overseas buyer picking up a second home.
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