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Downsizing pensioners should get a stamp duty break

There is a stamp duty exemption for first time buyers, so why not last time buyers? Older people who want to downsize should be allowed one stamp-duty free move to encourage them to downsize, says a new study.

Retirement interest-only mortgagesPensioners who want to down-size should be allowed to move once without needing to pay stamp duty, says a new report by Saga.

It has urged the Government this week to act after new research showed 25 per cent of over 50s are struggling to afford the cost of moving house.

The plans by Saga were unsurprisingly rather popular with its members, according to the report in the Daily Mail. Nearly three quarters of over 50s supported the one stamp duty-free move, according to a poll.

Find out more about the pros and cons of down-sizing

Benefits of downsizing

There are lots of reasons why as we get older we look to downsize. In many cases adult children have left home often leaving people in homes that are bigger than they need or want.  Maintenance and the cost of bills can get harder to manage as you get older.  While other homeowners want to free up equity to help them fund their retirement, or help their children or other relatives financially.

Selling their current home and moving somewhere smaller and cheaper also frees up equity without having to explore complicated equity release schemes, or borrow more with a mortgage for the over 50s or interest only retirement mortgages.

A knock-on effect of more older people downsizing, according to SAGAs report is that it will also free up much-needed larger family homes around the UK.

Stamp duty barrier to moving

In parts of the country where house prices are high, moving can be extremely expensive once stamp duty is factored in.

For example, someone moving from a £300,000 home to a £150,000 home will have a stamp duty bill of £500. But if you’re moving from a £900,000 home to a £600,000 property, you would face a £20,000 bill.

So a one-time stamp duty exemption would take quite a significant financial sting out of moving to a smaller property – especially in more expensive parts of the country, according to the report.

But some have argued that long-term homeowners are likely to have seen large gains from property inflation over the years and can cash in on this tax-free due to there being no capital gains tax to pay on main residences, making the exemption for homeowners, particularly for owners of higher priced properties, unnecessary.

Find out more about how much stamp duty you’ll pay.

Help for first-time buyers, what about last time buyers?

The Government recently revealed that the stamp duty exemption for first-time buyers introduced in November 2017 had helped about 240,000 people get onto the property ladder since its introduction.

But while this exemption has benefited individual first time buyers, there isn’t any evidence it has resulted in higher numbers of first time buyers coming to the market. So SAGA’s argument that a stamp duty exemption would free up more homes and encourage greater numbers of people to downsize may not play through.

Nevertheless we can’t argue with the fact that the cost of buying a home and cost of selling a home do add up to significant sum and are enough to be a deterrent for many, making this campaign one to watch.

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