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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.

May 9, 2019

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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6 Comments

  1. As a pensioner I think it’s an excellent idea!

    It will make more houses available and although that means prices
    will drop, more people can get on the property ladder. It’s better than the current situation where landlords are being forced to have licences even if they only have one property, and tenants are likely to face higher rents as a result.

    Parents will be more likely to release equity to help their families,
    and singles will more easily be able to pay for care in their old age.

    Comment by marion — May 14, 2019 @ 1:04 pm

  2. I absolutely agree. We are currently on the market with our large 4 bed detached lovely family home having both retired now. We are worried about the cost impact of stamp duty on our ability to purchase our next home. Any political party than brought in an exemption of stamp duty for people at this stage in life would get my vote!

    Comment by Linda Williams — May 13, 2019 @ 9:40 am

  3. I have been looking to downsize for about 12 months now but all the costs involved are making a move quite impossible at the moment. I am due to retire in 2020 and want to move to a lower maintenance property with lower running costs as I shan’t have a large pension income but prices for smaller properties are quite exorbitant and I do not want to buy anything that is leasehold, I want to know what I need to be paying not being suddenly hit with a large leaseholder bill. A one off removal of stamp duty to downsize would go a long way in helping me do so and would also free up a family home that is in excellent order.

    Comment by Janet Colyer — May 10, 2019 @ 6:04 pm

  4. I am looking to downsize to reduce maintenance and heating costs. However downsizing doesn’t necessarily mean a cheaper purchase cost. I have found many smaller houses/properties are more expensive than my home even though I have kept it well maintained and decorated. Financial help to downsize buy removing the stamp duty would encourage and support me to sell.

    Comment by Yvonne — May 10, 2019 @ 11:11 am

  5. I agree first time buyers get the help with stamp duty but not me being someone who wants to downsize. My children have grown up and left and my wife died of cancer. At 76 years of age living alone in a 4 bedroomed detached house with a double garage and large garden doesn’t make sense. House has been up for sale since 2015 but now off the market for the moment. Why? Buyers are hesitent since Brexit messed up my plans. Builders offering stamp duty paid for new build to first time buyers but no help for people like me. While expenses like heating and power go up I am struggling to keep up. I need to sell my house and move to a less expensive place. This one off Stamp duty relief for downsizers would definitely encourage me to put my house back on the market to sell. Extra monet would help me help my grown up children who are struggling. Money tied up in bricks. According to rics.org no sign of improvement ahead.

    Comment by Henry Pritchard — May 9, 2019 @ 9:00 pm

  6. I am in process of wanting to downsize.the costs are fat to high, and with housing shortage its silly..older people occupy family homes..and it’s these that are needed

    Comment by Barbara stevens — May 9, 2019 @ 6:54 pm

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    The decision to take out life insurance is triggered by a major life event according to @ReassuredCoUk. It might be… https://t.co/L5845m60fe

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