Prime home sales have slumped in the run up to the Budget as non-doms mull their options, says Knight Frank.

The number of offers made on UK properties above £5m tumbled by 18% in the year to September, data from the property agent shows.

By contrast, home sales over £2m fell by just 5%, over the same period.

The firm points out that stamp duty on sales above £2m accounted for 22% of the £11.7bn raised last year, “which is something the government may want to consider” as Chancellor Rachel Reeves completes her 30 October Budget.

Knight Frank head of UK residential research Tom Bill says the government’s tax treatment of the country’s 74,000 non-doms is “one reason for the recent hesitancy in super-prime property markets”.

The Labour Party manifesto has pledged to lift the stamp duty surcharge paid by non-UK residents by 1%, raising £40m over five years. These rates are currently 2% points higher than those that apply to UK residents.

But Bill adds: “A four-month delay between the election and the Budget has given the government time to consider the ramifications of its original plan for non-doms.”

Before July’s general election, Labour pledged to toughen existing Tory plans to abolish non-dom tax status.

In March, the then Conservative chancellor Jeremy Hunt announced that the non-dom tax regime would be phased out.

Under Hunt’s plans, people who moved to the UK from April 2025 would not have to pay tax on money they earned overseas for the first four years.

After that period, if they continued to live in the UK, they would pay the same tax as UK residents.

Nom-doms would be allowed a two-year transition period, during which they would be encouraged to bring their foreign wealth into the UK system.

Hunt said getting rid of the non-dom status would raise £2.7bn a year by 2028-29.

But Labour said it would go further, removing a 50% discount for non-doms bringing foreign income into the UK in the first year of the new rules.

It said it would also include foreign assets held in a trust within the UK inheritance tax framework.

The moves were intended to raise an additional £1bn to fund public services, but there are doubts whether the changes will generate as much money as hoped.

There is concern the changes could prompt wealthy foreigners to simply leave the UK.

Lobby group Foreign Investors for Britain has petitioned Labour to widen its proposals by introducing a tiered tax regime for non-doms.

Under this scheme, individuals would pay an annual amount based on their net wealth, which in turn would protect them from UK taxation, including inheritance tax, on overseas income.

Knight Frank points to an Oxford Economics survey, which found that 98% of non-doms would speed up their emigration plans under the current proposals, a figure that would drop to 13% if a tiered tax regime was introduced.

Stamp duty is not liable for any home under £250,000, although this threshold was doubled from £125,000 under the Liz Truss mini-Budget in September 2022.

Reeves is considering restoring this lower threshold, according to a report in the Times last week. The £450,000 stamp duty threshold for first-time buyers may also be brought back to £300,000.