WE’RE IN A TAX TRAP
To downsize from our family home we’ll have to pay our buyers’ stamp duty for them...
CRIME fiction writer Sharon Birch, 58, and her partner Stephen are desperate to downsize from their five-bedroom townhouse in Seaton Carew, Hartlepool.
They are among the almost 90 pc of people aged over 65 who are rattling around homes that are now too big for them, according to figures from research institute the International Longevity Centre.
But like millions of homeowners who would like to downsize, Sharon and Stephen’s plans are being thwarted by stamp duty, which they say is putting off potential buyers and leaving them stuck in a home that no longer suits them.
In fact, Sharon is so worried about it that she is willing to pay a potential buyer’s stamp duty out of her own pocket — just so that they are not deterred from purchasing it.
The couple’s children have long since flown the nest — they now have five grandchildren. The granny annexe and large garden that were once a huge asset to the couple are now a burden requiring upkeep and maintenance.
‘We really need to downsize as it’s too big for us now that the family have moved out,’ says Sharon.
Sharon and Stephen long instead for a more manageable bungalow — and have set their sights on one — if they can only find a buyer for their own home.
Their property will go on the market this week for £280,000 with
Manners & Harrison in Hartlepool. At this price, potential buyers will be forced to pay £1,500 in stamp duty. Anyone considering buying it as a second home or to rent out would pay nearly £10,000 in tax. Only firsttime buyers, who have an exemption for paying stamp duty on properties worth up to £425,000, would avoid stamp duty all together.
Sharon worries that for home movers or landlords with a budget of £280,000 a significant tax bill such as this would be a huge deterrent.
Stamp duty most commonly puts off downsizers because it eats into the amount of money they could free up by moving to a smaller home.
Moving home and transforming it into somewhere you are happy to live throughout your retirement years costs enough as it is — adding a tax bill worth thousands of pounds on top can make it feel like it’s not worth bothering.
Stamp duty is a barrier to selling across the housing market. Jennie Hancock, of Property Acquisitions, says: ‘I have sellers moving from a £2 million house who only downsize by £ 500,000,’ she says. ‘For some, paying £90,000 in stamp duty is a deterrent.’
However, even downsizers — such as Sharon — who do not face a large bill themselves may still be hit by the impact of stamp duty, as it can put off potential buyers of the home they are looking to sell.
Sharon feels that the level of stamp duty is a deterrent to young couples looking for a family home and especially unfair given the tax was cut to nothing for properties valued at under £500,000 during the pandemic.
‘It’s ridiculous. The Government should have increased the stamp duty thresholds so that they rose with house price inflation — the
current system makes no sense whatsoever. Stamp duty is such a disincentive for buyers — we feel we have no option but to offer to pay the stamp duty.’
According to experts, the thorny issue of stamp duty is stagnating property sales at the top and bottom ends of the market.
Buyers on the first and second rung of the property ladder cannot afford to climb up one rung at a time as the cost of moving is too expensive.
Rather they are having to wait until they have saved enough money to jump a few rungs at a time — which in a cost of living crisis could take years.
The result is a sluggish property scene with frustrated property owners feeling trapped in a property that no longer suits their lifestyle or their needs.
Anyone looking to purchase a property in the Home counties for more than £575,000 will pay 10 pc stamp duty.
Given the average house price in Berkshire is £ 522,959, Kent, £ 456,352, Surrey, £ 636,42 and Middlesex is £800,566, then most buyers looking to purchase a family home with three bedrooms will need to set aside stamp duty prices of around £60,000-£100,000.
As the average salary in the UK is £34,963, this is almost impossible for the average family even with two adults working full-time. Stamp duty needs to be paid within 14 days of buying a property or piece of land.
And although it may seem like a short-term solution to add the cost of stamp duty to your mortgage, it will incur interest over the duration of the mortgage term and will also affect your loan to value ratio (LTV).