PER­SONAL AC­COUNT

The Daily Telegraph - Your Money - - MONEY - Lau­ren Davidson

Cut stamp duty for older buy­ers try­ing to down­size and raise the to­tal tax haul

Why would any­one down­size? Take Dotty, 75, re­tired – a Tele­graph reader, of course. She lives in the semi-de­tached house where she raised her chil­dren, but doesn’t need so much space now.

She could sell it for £657,865, the av­er­age price for these prop­er­ties in Lon­don, ac­cord­ing to Right­move data, and buy a flat, which typ­i­cally costs £553,498 in the cap­i­tal.

On top of the lawyer’s and es­tate agent’s fees, and the other costs as­so­ci­ated with mov­ing, Dotty would have to pay a stag­ger­ing £17,674 in stamp duty – roughly one sixth of her left­over cash. Wouldn’t she be bet­ter off stay­ing put?

Dotty and oth­ers like her clearly think so. Across Eng­land, there are more than a mil­lion prop­er­ties oc­cu­pied by some­one aged 65 or older and with at least two spare bed­rooms. And they’re not go­ing any­where: more than 90pc of the 10.3 mil­lion house­holds lived in by some­one 55 or older did not move home in the three years up to 2015.

Why not? A sur­vey by Later Life Am­bi­tions, a cam­paign group that rep­re­sents a quar­ter of a mil­lion pen­sion­ers, found that half of its mem­bers said the cost of mov­ing was the main bar­rier to them up­ping sticks, with 30pc specif­i­cally cit­ing stamp duty.

Pol­icy Ex­change, a think tank, has come up with a so­lu­tion to get around this: re­duce stamp duty for older peo­ple. In a re­port pub­lished this week it said this would “in­cen­tivise a new wave of older home­own­ers to down­size – which in many cases is sim­ply not worth­while”. It specif­i­cally called on the Gov­ern­ment to re­move the 2pc stamp duty band, levied on homes priced be­tween £125,000 and £250,000, for older home­own­ers look­ing to move. This would save Dotty £2,500.

Pol­icy Ex­change is far from the first to sug­gest a tax ex­emp­tion for down­siz­ers. Cross­bench peer Lord Best, a mem­ber of the All Party Par­lia­men­tary Group on Hous­ing & Care for Older Peo­ple, has long ar­gued that it would en­cour­age pen­sion­ers to down­size, re­leas­ing fam­ily hous­ing for younger buy­ers and stim­u­lat­ing the slug­gish prop­erty mar­ket.

It wouldn’t have to be out of the kind­ness of the Trea­sury’s heart; aca­demic re­search has shown that a 1 per­cent­age point re­duc­tion in stamp duty could boost prop­erty trans­ac­tions by 20pc – suggest­ing that eas­ing the tax bur­den on down­siz­ers would bring in more stamp duty over­all. The In­sti­tute of Pub­lic Care at Ox­ford Brookes Univer­sity worked out that even if trans­ac­tions rose by just 10pc, the ex­emp­tion would gen­er­ate £186m in ex­tra tax revenue per year.

The Gov­ern­ment is clearly ca­pa­ble of ap­ply­ing some imag­i­na­tion to stamp duty. A year ago it changed the rules for first-time buy­ers, re­mov­ing the levy al­to­gether on prop­er­ties worth up to £300,000 and tak­ing 5pc on the pur­chase price be­tween that and £500,000. This saved first-timers up to £5,000 in stamp duty.

Pol­i­cy­mak­ers have also sup­ported younger buy­ers’ prop­erty dreams with schemes such as Help to Buy –

Schemes such as Help to Buy have re­sulted in more homes for younger buy­ers at the ex­pense of pen­sion­ers

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