Chancellor George Osborne's stamp duty reforms are proving expensive for the Treasury wiping £620 million off its revenues last year, new figures show.
The losses could rise as the number of property transaction in London falls at a faster pace than in the rest of England and Wales.
This will be a further blow for the Treasury as London boroughs accounted for 44.3% of all stamp duty in England and Wales between January and October 2015.
This is a rise from 41% in same period in 2014, according to new data from Knight Frank.
Chancellor George Osborne's reforms that came into effect on 4 December upped the tax burden on properties costing £1 million or more.
But stamp duty revenue in London fell by £105 million between January and October 2015 compared to the same period in 2014.
That is largely due to a decline in transactions, which fell more steeply than anywhere else in England and Wales.
Head of London residential research Tom Bill said: “The Government is on the way to relying on London for half the country’s stamp duty revenue yet it is the area which appears most sensitive to recent and proposed stamp duty reforms.”
Bill said a series of factors have contributed to the decline, including tighter mortgage lending rules, higher rates of stamp duty above £1.1 million and a shortage of supply.
He warned: “The risk with higher transaction costs is that you actually lower the tax take and reduce social mobility to the point it becomes counter-productive.”