Pensioners are being warned about the dangers of “downsizing” their property in retirement as they could have to pay up to 12 per cent in extra tax.
Experts are suggesting the Chancellor could introduce cuts to stamp duty, to help people downsize.
Helen Morrissey, the head of retirement analysis at Hargreaves Lansdown, warned stamp duty costs can make downsizing off-putting.
She explained: “Downsizing to a smaller home can seem like the ideal way to plug gaps in your pension planning. However, when you add up the cost of moving many find they won’t get as much from the sale of their family home as they thought.
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Many older Britons are at risk of falling foul of stamp duty
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“A group of MPs have urged the Chancellor to consider cutting stamp duty for downsizers in the Budget as a way of freeing up more homes for younger families.
A recent survey carried out by Hargreaves Lansdown found that 23 per cent of Britons are considering downsizing in retirement.
However, 22 per cent said moving was too expensive with a further 13 per cent citing stamp duty as a particular cost that would stand in their way.”
Stamp duty is a levy someone might have to pay when buying a residential property or piece of land in England which is above £250,000, unless an individual qualifies for first-time buyers relief.
There are several rates for the tax which is calculated on the part of the property purchase price falling within each band.
As it stands, no stamp duty is paid on properties which cost below £250,000 but a five per cent rate is applied to purchases between this threshold and £925,000.
Any properties which are priced above this amount and between £1.5million are hit with a 10 per cent rate for stamp duty.
Properties with a purchase price higher than £1.5million have a 12 per cent rate.
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Stamp duty is a tax some households pay need to pay when the purchase property
PAThose purchasing a second home will have to pay an extra three per cent in stamp duty on top of the standard rates which applies to properties costing £40,000 or more.
First-time buyers in England and Northern Ireland will not pay the levy on properties worth up to £425,000.
Homes costing up to £625,000 will be have to pay stamp duty at five per cent.
First-time buyers will have to pay the standard rates of the tax if the property they are buying is worth more than £625,000, as they won’t qualify for any first-time buyers relief.