December 19, 2024
Barclays calls for tax breaks for downsizers | Personal Finance | Finance #UKFinance

Barclays calls for tax breaks for downsizers | Personal Finance | Finance #UKFinance

CashNews.co

Barclays has urged Rachel Reeves to scrap a tax costing up to £41,250 for people born before 1969 who want to sell their home.

Older people should be able to claim back the cost of moving home – and cut the stamp duty bill – when they downsize, according to one of Britain’s biggest banks.

Barclays claims the incentive could encourage older people to give up family homes that are too large for them in a move that could release as many as 3.8 million homes for people with children.

It is arguing in favour of a series of grants and vouchers that would allow downsizers to offset moving costs against their onward stamp duty bill when they buy a new home.

Others suggest that stamp duty should be removed entirely when home owners over the age of 55 trade down to a smaller and cheaper property.

Barclays is also calling for initiatives to simplify the moving process, better advertisements for suitable developments and the building of more retirement housing and villages.

Mark Arnold, head of mortgages and savings at Barclays, said: “A stronger, more holistic strategy is needed to tackle the immense issues faced by the housing market.”

Barclays’ research found around 85 percent of owner-occupied homes in the UK have at least one spare bedroom making them “under-occupied”.

Some 1.7 million of these households are open to moving homes in the next two years but the bank said the right incentives could boost this number to 3.8 million.

Currently, stamp duty must be paid on homes worth more than £250,000, or £425,000 for first-time buyers. The rate gradually tapers up, from 5 percent to 12 percent for the most expensive properties.

A downsizer buying a property for £500,000 faces a stamp duty charge of £12,500, rising to £41,250 for someone buying a £1m home. On top of that are legal and house move fees, which drive up the cost.

Barclays’ report suggests the Chancellor Rachel Reeves could offer households grants to incentivise downsizing, or the ability to offset moving costs against stamp duty.

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

The banking industry trade body UK Finance complains that stamp duty can be a “major financial barrier” for older property owners looking to move into smaller homes.

It called for abolishing the property sales tax for people aged over 55 on the basis it would encourage sales of larger family homes to younger people.

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.”

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.”