Scrap stamp duty for downsizers, major banks tell Labour

Empty nesters should be spared stamp duty when they downsize, the UK’s leading banks have told Labour.

A new report by trade body UK Finance found that stamp duty can be a “major financial barrier” for older property owners looking to move into smaller homes.

Abolishing the tax for “last time buyers” aged 55 and over would help alleviate Britain’s housing shortage by freeing up more spacious properties for younger families, it said.

Around four in ten homes across the country are “under occupied” – meaning they have bedrooms lying empty – according to a 2023 government housing survey.

UK Finance, which represents more than 300 firms including 120 mortgage lenders, said the threat of a large tax bill is deterring these homeowners from downsizing.

Stamp duty land tax is charged on the purchase of homes worth more than £250,000, or £425,000 for first-time buyers. The rate gradually tapers up, from 5pc to 12pc for the most expensive properties.

This means a stamp duty bill of £10,000 for a property costing £450,000 in England, unless you are a first-time buyer.

The UK Finance report said: “The UK housing market is grappling with a shortage of affordable, secure and suitable homes for people at different life stages.

“We believe that well-considered policies, backed by evidence whilst acting on lessons learned from the past, could address the challenges the housing sector faces.”

Research by the Centre for Ageing Better found that four million people over the age of 55 would like to move home, but only a fifth anticipated being able to do so for a variety of practical and psychological reasons.

UK Finance added: “Removing these obstacles could help a significant number of would‑be homeowners.”

The report also urged the Government to maintain the current nil‑rate stamp duty bands in England at their current levels for first‑time buyers.

The threshold for first-time buyers to avoid paying stamp duty was raised from £300,000 to £425,000 in Liz Truss’s mini-Budget of 2022. For home movers, the threshold was raised from £125,000 to £250,000.

However, these changes were only temporary and are due to end in March 2025.

David Hollingworth, of brokerage L & C Mortgages, said: “When you want people to free up houses more suited to families, stamp duty is one of the big hurdles putting people off.

“Moving is expensive and just because you’re downsizing doesn’t mean you’re not going to be hit with a large bill. And it often comes at a time when older people may be considering how their retirement finances and income will look.”

In July, Deputy Prime Minister Angela Rayner unveiled plans to build 1.5 million new homes over the next five years to solve the country’s housing shortage.

The Government was approached for comment.