Published On: Tue, May 14th, 2024
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Stamp Duty: ‘Pensioners like me can’t move house thanks to outrageous £175k tax bill’ | Personal Finance | Finance


The punishing stamp duty tax regime is killing hopes that older people in large – often expensive – homes will trade down and free up the properties for families, it is claimed.

It has been suggested that one way to free up family homes is to encourage older people to give up the properties that are now too large for them, running up big utility and maintenance bills.

However, there is mounting evidence that older people are being put off following this route because of the costs of moving home – chiefly the stamp duty applied to the purchase of a new property.
It has been suggested that the property tax regime needs radical reform to encourage older people to trade down, perhaps with a stamp duty amnesty. Some argue that more drastic action is needed to pressurise the elderly people to move on.
Simon Gerrard, of Martyn Gerrard Estate Agents, is championing a campaign to completely reverse the tax so it is paid by the seller, and scrapped entirely for older homeowners looking to downsize.
Mr Gerrard told the Telegraph that the Government should support first-time buyers by reversing Stamp Duty in order to help older people free up larger homes.

There is no stamp duty on properties purchased with a value up to £250,000, but it is then charged at 5 percent at those sold for between £250,001 and £925,000, then 10 percent between £925,001 and £1.5 million, and 12 percent above that figure.

David Forcey, aged 79, has lived in a five-bedroom house in south-west London with his wife for 35 years.

To downsize from their £2.5m house to a £2m one, the retired couple face paying the stamp duty tax rate of 12 percent – requiring them to sign a £240,000 cheque to Chancellor Jeremy Hunt.

At the same time, the purchasers of their £2.5m property would be paying an eye-watering £300,000.

Mr Forcey said the tax is preventing people from downsizing and freeing up family homes.

“This argument about us ‘elderly’ people being bedroom blockers, I do understand,” he told the Telegraph. “There are lots of young people on our street in their forties with small children. So this could be a great family home. But stamp duty is a huge disincentive for us to move. It’s a very unfortunate tax.
“Our children tease us as the lucky generation, but we were paying 16 percent interest rates on these homes once-upon-a-time.”

Mr Forcey thinks a better way to tax property owners would be on the capital gain they make.

He told the Telegraph: “We’ve been here for 35 years. I appreciate that we’ve made a big capital appreciation which is tax free.

So I do think at a lower level, there should be some sort of capital gain to pay.”

But as long as current stamp duty thresholds and rates remain, the couple will continue to live in their current home and resist moving.

Sharon Scott, aged 68, moved from the south of England to Yorkshire some 20 years ago after becoming a single parent.

However, she is now keen to move back to be closer to her adult children.

But to buy a property in north Hampshire which is a similar size to her current home would land Sharon and her husband with a stamp duty bill of £90,000.

Even if they were to downsize from a four-bedroom to a less spacious, three-bedroom detached house with a garden, they would still need to set aside over £11,000 for the property sales tax.

The Government is reportedly considering increasing this threshold in England by £50,000, to £300,000. While this will be good for some house builders, by boosting demand and asking prices, it is unlikely to encourage many older people to downsize.

In Northern Ireland, stamp duty applies like it does in England. But other parts of the UK have different thresholds which are even more damaging to housing market fluidity.

In Scotland, “land and buildings transaction tax” replaced stamp duty in 2015. It kicks in at £145,000, charging 2 percent on houses up to a value of £250,000. Any value over this up to £325,000 is charged at 5 percent, and it then rises to 10 percent on anything up to £750,000, with a figure of 12 percent above that.

This means in Scotland, a £450,000 home would incur a £18,350 tax bill – but in England, the same valued property would incur a significantly lesser £10,000 bill.

On top of that, if buyers have not been able to sell their current property by the time they come to buy again – usually to downsize – they also face a 6 percent additional dwelling surcharge. In England, this surcharge is 3 percent.

In Wales, “land transaction tax” was brought in six years ago. The threshold before paying tax on a property purchase is £225,000, after which a 6 percent rate kicks in up to £400,000, and then a 7.5 percent rate.



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