Omnium Wealth Management

Downsizing? Will Stamp Duty affect you?

In recent years there has been much focus on helping first time buyers to get on the property ladder. But, another group facing challenges of high costs and lack of stock of appropriate properties have received little attention: those looking to downsize in retirement.

According to the over-50s insurer, Saga, 25% of its members who wish to move to a smaller property are unable to afford the associated costs.

Saga is calling for a new tax relief that would allow one Stamp Duty-free move to a smaller property and has found that nearly three-quarters of its members would be in favour of such help.

Such a tax cut for older homeowners could be controversial as this group have often built up significant equity in their properties. However, Saga’s argument is that the house market as a whole would benefit from more family-sized homes coming to the market and increasing liquidity.

Managing Director of Saga Money, Jeff Bromage, said:

"More needs to be done to help free up more family homes to the market in order to continue the supply of first homes.

"We are urging the Government to reconsider this exemption - to support potential downsizers, their families and the wider housing market."

Saga has argued that tax breaks for downsizers could be similar to those introduced for first-time buyers in England and Northern Ireland in 2017. Those buying their first home for between £300,000 and £500,000 pay 5% tax on the amount above £300,000.

Statistics from HMRC show that, since it was introduced, this relief has benefitted more than 288,000 first-time buyers, saving an estimated £680 million.

How can property taxes affect downsizers?

There is no special relief for retirees choosing to move to a smaller property with normal residential property rates being applied. These rates are different depending on where in the UK you are purchasing a home.

England and Northern Ireland
Stamp Duty Land Tax ranges from 2% to 12% on various portions of residential sales over £125,000.

Land and Buildings Transaction Tax is payable on portions of sales, starting at £145,000, or £175,000 if it is a first home.

Land Transaction Tax is levied on amounts from £180,000.

What if we don’t want to downsize?

Downsizing does not suit every retiree, with many wishing to stay in the family home in which they have spent many years building memories. If this is the case, equity release may be a solution to help supplement your retirement income or clear debts, without the upheaval of moving house. Read more about our equity release service here, and our case study of a satisfied equity release client.

We can help

For more information on how you may be affected by taxes on downsizing, or to find out if equity release may be the right solution for you, give us a call today on 01483 205890.


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