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24/06/2021 General, Blog
As the stamp duty holiday sets to end, many feel that this tax is unfair on older homeowners looking to downsize.
It is a subject that has been debated for decades and one that has found little resolve. Experts are demanding to know, why are pensioners being forced to pay stamp duty tax in order to rightsize (the new term for downsizing) their homes? At a time in life when it is important to release equity, the stamp duty burden can make this move a complex process.
Many believe the current pandemic has only highlighted this issue further. At present there has been a stamp duty reprieve, allowing consumers to move freely into another property without paying a high tax bill. This in turn, has kept the housing market moving during a turbulent time. However, this freedom of tax is soon due to be phased out and, once more, the generation looking to move into smaller but more suitable homes will be penalised. Figures from leading UK lenders suggest 54% of privately owned homes are under occupied – resulting in two or three spare bedrooms in a single property.
In the coming months, when an older homeowner looks to move from their family home, they must pay an extortionate tax levy to downsize. It is a move that many retirees undertake to supplement their pension. Purchasing a £500,000 property, for example, will result in a £15,000 stamp duty tax. Combined with legal costs and moving fees, these individuals often feel deterred from downsizing into a more appropriate property. The result of this is a stagnant market which impacts families looking for larger homes and first-time buyers.
In recent years, there have been several calls in Parliament for this tax to be made exempt. In July 2020 a letter was sent to the Chancellor by top housing and pension bosses calling for the abolition of stamp duty tax for the generation looking to downsize. They argued that a waive in stamp duty tax would not only help young families on the property ladder, but create safer places for elderly homeowners to live in.
However, COVID 19 has added another dimension to the stamp duty debate. As remote working looks set to continue for many, buyers are looking to leave cities and relocate to larger countryside homes. The demand for family houses is now greater than ever before. There is a real feeling that, with a relaxation of stamp duty, these properties will become more readily available, easing the concern of a housing shortage.
The latest Rightmove report highlighted that in April this year, the number of 3 bed properties available to buy was down 50% on the previous year. The abolition of stamp duty tax for those older homeowners who desire to rightsize, will free up houses for families wanting to move up the property ladder. It will also enable pensioners to live in a property that enables independence and a better quality of life.
It is fair to assume that the loss of tax from the older generation, could generate much more revenue for the Government as more housing chains are unlocked as housing supply increases.
An increasingly popular choice for rightsizers is the community of a retirement village. It can be, for many, a vital move from a position of dependency upon others to a freedom of living with a greater quality of life. A recent study highlighted the overwhelming benefits of retirement villages including that village residents are more active and remain healthier for longer. This adds weight to the case that the removal of stamp duty tax can allow older homeowners access to retirement villages, where medical and community care are at the forefront of their values. In turn it is also reasoned that this tax cut will save the NHS a substantial amount in medical costs for those needing care in unsuitable homes.
The decision to move for a greater freedom of living, whether to a more suitable property or a retirement village, is often one that is deterred by the payment of stamp duty tax. It can be, for many pensioners, a choice that is simply taken out of their hands leaving them to live in a home which is no longer adequate for their needs. With experts maintaining that an abolition not only benefits older homeowners and the NHS, but the property market as a whole, one can expect this debate to continue to be raised in Parliament for several months or years to come. In fact, the Associated Retirement Community Operators (ARCO) reports that if 250,000 people lived in retirement housing with care by 2030, this would save the NHS and the social care sector £5.6 billion.
As an award-winning provider of retirement villages, we are proud to pay the stamp duty for any new residents joining the Rangeford family (subject to terms and conditions). To find out more about our villages, contact our friendly sales team today, on 0800 1357420 or visit www.rangefordvillages.co.uk.
Blog by: Howard Nankivell, Chief Executive Officer at Rangeford Villages.
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