While the reforms have been cheered by many as they make the process of house-buying more affordable for 98 percent of buyers, according to Osborne, those in the high-end property market will be hit by a higher tax rate that luxury agents call a "disaster."
The new rates mean that buyers pay no tax on properties up to £125,000 in value, then 2 percent on houses worth up to £250,000 and 5 percent up to £925,000. Homes worth up to £1.5 million, however, are now subject to a stamp duty of 10 percent and there is now a 12 percent on any property worth more than that. The changes came into effect at midnight on Wednesday.
"A £5 million pound house will see its stamp duty rise from £350,000 to £514,000 – but of course, this is a charge that is only paid once, when the property is bought," Chancellor Osborne told U.K. members of parliament Wednesday.
Crucially, the reforms could mean that a proposed "mansion tax" -- an annual levy on properties worth over £2 million -- proposed by the opposition Labour Party, could be shelved. That proposal provoked concerns among luxury property specialists angry reactions from high-profile personalities with even Angelina Jolie commenting on the tax.
Nonetheless, luxury property estate agents say the changes could still undermine and even destroy the U.K.'s high-end property market.
"Twelve percent stamp duty on residential properties priced over £1.5 million is a disaster for prime properties sales, but a great help to the mass market. The new stamp duty…threatens high end sales volumes. So there is no 'mansion tax,' but this new stamp duty could harm prime market," Alex Newall, managing director at Hanover Private Office, which manages assets such as luxury property for high net worth individuals.