Campaigners say offering a targeted cut in Wednesday’s Autumn Statement would help older people who are struggling to heat and maintain larger family homes. Waiving the levy on so-called “last-time buyers” moving to a smaller, more manageable property would also free up residences for young, growing families who need space.
Stamp duty raises around £15billion a year but has been widely condemned as a tax on mobility.
Homebuyers pay it if their home costs more than £250,000. It kicks in at five percent and rises with property values to a maximum 12 percent for homes costing more than £1.5million.
It now adds £2,980 to buying the average home, valued at £309,616 in August, says the Land Registry.
An older person downsizing from a £750,000 property to one that is costing £500,000 would pay a hefty £12,500 on their new purchase.
The burden is set to get worse as the threshold will drop to just £125,000 in March 2025, lifting the bill on an average home in England to £5,480.
Currently first-time buyers in England or Northern Ireland pay no stamp duty on properties worth up to £425,000.
Downsizers do not get any tax break and campaigners would like this to change.
Conservative MP for Ashford Damian Green said: “Exempting elderly people from stamp duty when they downsize into a more suitable home would be an effective and dramatic way of achieving this.”
Mr Green added: “This would help free up the whole housing market, and encourage wider home ownership.”
Darwin Friend, at the TaxPayers’ Alliance, said: “By making it more difficult to move, the tax makes life harder for all households, young or old. Jeremy Hunt could secure an easy win for taxpayers of every age by scrapping this nasty tax.”
Paula Higgins, boss of the HomeOwners Alliance, said stamp duty for those seeking to free up equity in their home could “tip the balance as it may make financial sense to stay put and use equity release instead”.
Jonathan Rolande, spokesman for the National Association of Property Buyers (NAPB), added: “Many older homeowners have been keen to downsize for some time and scrapping stamp duty on their new house, flat or bungalow could be a spur to take action
Almost one in four say they plan to downsize in retirement but 22 percent say the moving process is too dear and 13 percent fear stamp duty costs, financial advisers Hargreaves Lansdown found.
Homebuyers have paid £8.6billion in the tax so far this year, says Coventry Building Society using HMRC figures.
From census data, the Coventry says there are at least 24.5 million spare bedrooms across England.TheTreasury said: “The majority of owners wishing to downsize are likely to have equity in their current property, and are already exempt from capital gains tax on any gain made on their main residence.”
Adrian Lowery, financial analyst at wealth manager Evelyn Partners, said stamp duty bills are a disincentive towards downsizing. “Many retirees resort to equity release and lifetime mortgages but they can become unexpectedly expensive and burdensome, and may leave a nasty surprise for their beneficiaries.”
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Lowery said the stamp duty “blockage” contributes to the dearth of family homes on the market and makes it less possible and more expensive for younger buyers.
Many older people feel trapped in their old homes, said Carolyn Matravers, director at later life specialist advisers Bluebell Financial Management. “I’ve got several clients who cannot sell in the current market or fear they will not raise as much as the hoped. Many only use one or two rooms of what once was a large family home that is far too big for them.”
Reports of stamp duty relief or reduction in the Autumn Statement due could be “good news”, Lowery added.
A Treasury spokesperson said: HM Treasury spokesperson said: “To get the market moving we have doubled the Stamp Duty Land Tax (SDLT) nil-rate band from £125,000 to £250,000 – which reduces the SDLT bills for all home movers by up to £2,500 until 31 March 2025.
“The majority of owners wishing to downsize are likely to have equity in their current property, and are already exempt from capital gains tax on any gain made on their main residence.
“For most of those looking to downsize, the stamp duty due on the move-in property will be lower than the estate agent’s fees.”
