Buyers back stamp duty cut for downsizing pensioners

There are whispers in Whitehall about plans to encourage pensioners to downsize with a stamp duty tax break.

The move, first reported in the Daily Mail, has been welcomed by the National Association of Property Buyers (NAPB) which says it will free up the market.

The NAPB’s Jonathan Rolande, said: “It would allow pensioners to move without the penalty of high stamp duty and would certainly encourage more to do so. 

“Currently a pensioner selling a family home at £700,000 to buy at £500,000 would face a £15,000 stamp duty bill and with other costs such as estate agent and solicitors a move downward is going to cost them nearly £30,000 – a figure many simply cannot bring themselves to pay when leaving a much loved family home. 

“Government receipts from stamp duty have more than doubled in the last 10 years so there is certainly capacity to offer targeted reductions to help free up stock.”

The rumoured proposals could also see buy-to-let landlords given incentives such as lower capital gains tax to sell their second homes to first-time buyers.

But Rolande adds that this measure could backfire.

He said: “The last thing we need right now is fewer properties to let, penalising those not in a position to buy their home. 

“If tax breaks for wealthy landlords are on the table, why not use them to incentivise those who let their property on longer term agreements, giving more security to hard pressed tenants? 

“We’re very glad that the government is looking at measures to repair parts of the broken property market but I am fearful that ill-considered action to solve one problem here will create another issue elsewhere.”

It comes as a survey by Hargreaves Lansdown this week found just 11% of those aged 65-74 were considering downsizing as an option to fund their retirement.

Of those who decided against downsizing, one third said they were too attached to their home. 

A further fifth said it was too expensive and another 22% said they already had enough money.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said the reality of downsizing is much harder than first thought. 

She said: “Moving to a smaller property can look like a sensible choice, the children have left home and you have spare room, but the emotional pull of leaving the home you’ve raised a family in can prove too much. 

“This is especially the case if you have friends and family close by – you are unlikely to want to move away from such a valuable support network, particularly as you get older when you may be in more need of support.

“The other key factor to consider is that you may not make as much money from downsizing as you first thought. 

Morrissey said homeowners may have benefited from enormous house price growth over the years but house moving is expensive at the best of times.

She added: “Once you have totted up the legal fees and stamp duty you might find a huge dent has been taken out of your profits. 

“If you are looking to move to a smaller property nearby then you may find your budget just doesn’t stretch far enough to cover the cost of your new home while leaving you with a retirement lump sum. 

“Unless you are moving from a house to a flat then you could struggle. Even those living in London with its sky-high property prices may find they need to move a considerable distance to get their home and their retirement income sorted.”