Skip to content

Unlocking housing stock: opportunities for downsizers

The concept of spending a lifetime in one home, raising children, hosting grandchildren, and passing down the property to the next generation has increasingly become a distant dream. The increasing cost of living has drastically changed how younger individuals approach the challenge of entering the housing market, and has also impacted how older individuals strive to move up the property ladder.



Unlocking housing stock: opportunities for downsizers

The UK is currently facing a notable shortage of available housing, posing a tough challenge for first-time buyers. However, this scarcity of properties is not just affecting newcomers but also creating obstacles for empty-nesters looking to downsize. The competition for limited homes has made the process of finding a suitable property for the next phase of life more daunting.

To assist first-time buyers in stepping onto the property ladder, the government had previously waived stamp duty for homes priced up to £425,000. Unfortunately, anyone hoping for stamp duty relief from the March Budget announcement, aiming to ease the financial strain for empty-nesters transitioning to smaller residences, was left empty-handed. 

Stamp duty land tax in England and Northern Ireland applies to properties valued over £250,000, unless you are a first-time buyer. The current stamp duty regulations pose a financial dilemma for empty-nesters seeking to downsize and pass on their property to the next generation, as downsizers face significant costs based on their property's value.

For example, a first-time buyer purchasing a £300,000 home would pay zero stamp duty, while a downsizer would face a £2,500 bill. If the property price increases to £450,000, the downsizer's stamp duty could reach £10,000, adding to the financial strain of moving to a smaller home.

Instead of abolishing relief from stamp duty, the government abolished Multiple Dwellings Relief (MDR), which was initially implemented to provide tax relief for individuals purchasing more than one property in a single transaction. This change adds another layer of complexity for those looking to downsize or invest in multiple properties. The absence of this relief can impact the financial calculations and considerations for individuals navigating the property market, further emphasising the need for careful planning and expert advice in these transactions.

Aside from stamp duty concerns, downsizers may also fret over converting their property equity into cash with regards to inheritance tax implications. The 'residence nil rate band' permits married couples to pass on up to £350,000 worth of property to their children without incurring taxes. Fortunately, downsizing does not necessarily jeopardize this tax relief, as certain provisions may still apply to your estate even after selling your larger property.

While the idea of abolishing stamp duty may serve as an incentive, the focus should not solely be on pushing older individuals to downsize. The key lies in prioritising their needs in the planning and housing sectors. Offering suitable properties in prime locations at affordable prices can provide seniors with a broader range of choices than what is currently available.

Beyond just the size of a home, factors such as access to essential services, connections with loved ones, transportation options, and community amenities all play vital roles in enhancing the living experience for individuals in their later years.

With a proven track record of serving over a million satisfied policyholders, Legal & Contingency via Ci Online are proud to offer market leading policies to solicitors, legal executives and licensed conveyancers. Explore our platform for more information. 


Leave a Comment