Over 65s ‘need appropriate incentives’ as Inheritance Tax & Stamp Duty stop ‘right-sizing’
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It appears pensioners are not being provided with enough options to downsize to a home more suited to them, with low numbers of bungalows and retirement housing being built. The costs associated with moving house may also be dissuading pensioners.
Solving the country’s housing crisis must include a greater focus on building new homes for older people and policies to help them right-size, leading professional property body Propertymark has told the UK Government.
The UK has more than 12.5 million people aged 65 and over as of 2020 – 18.65 percent of the population, which will rise to 21.8 percent by 2030, according to figures from the Office for National Statistics.
But while a third of older adults have indicated they would like to move from their present home, housing for older people is scarce with just five percent of over 65s living in specialist housing as a result.
Propertymark believes the lack of housing options for older people, combined with Government policies that discourage them from moving, is prompting many to stay put in unsuitable, and often underoccupied homes.
Not only could this be aggravating wider housing supply issues, but non-specialist homes can also pose a serious health and safety hazard for older inhabitants, potentially placing additional and unnecessary pressure on the health and social care systems.
New bungalow builds remain low, with under 2,000 bungalows built in 2020, representing just 1.57 percent of all homes. In comparison, 26,000 were built in 1987 according to figures from the National House Building Council’s new home statistics.
There were just 730,000 retirement housing units across the UK as of June 2019, which makes up just five percent of the over 65s population, according to research from the Elderly Accommodation Counsel.
Eleanor Bateman, Policy and Campaigns Officer at Propertymark, said: “We need a housing mix that includes more specialist homes for older people, as well as appropriate incentives to right-size.
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“Currently, older people aren’t inclined to move because Government policies simply don’t facilitate it. When faced with a potentially significant Stamp Duty Land Tax bill – combined with other measures such as the Nil Rate Residence Band enabling tax savings – it is unsurprising that many older people choose not to move.
“Additionally, the lack of housing options means even those who would like to move often end up staying put because there just aren’t enough suitable, affordable properties for them in the housing market.
“This lack of supply, frequently coupled with service charges or event fees, exacerbates affordability issues further.
“If the UK Government is serious about tackling the undersupply of housing in the UK it must rethink its tax policy which acts as a hindrance to market movement, and provide the housing for older people the country needs so our existing housing stock is utilised more efficiently, and right-sizing becomes an affordable and realistic option.”
What is the nil-rate band?
The nil rate band is the threshold above which Inheritance Tax is payable. Assets can be passed on up to the value of one’s nil rate band without creating an Inheritance Tax bill. The nil rate band is currently £325,000 and it will remain fixed at this amount until April 2026.
The residence nil rate band is an additional amount that could be passed on tax-free against the value of the family home. The residence nil rate band is currently £175,000 and applies to those who pass their property on to direct descendants.
What is Stamp Duty?
Stamp Duty is a conditional tax paid when one buys land or a residential property in either England or Northern Ireland.
It is paid on any property that costs over £125,000, but for first-time buyers, this threshold is £300,000 instead (provided the property costs over £500,000 in total). Stamp Duty is then paid at the relevant rate of five percent on the remaining amount, up to £200,000.
Second-home buyers will still pay an extra three percent Stamp Duty on any property that costs more than £40,000. This tax applies to both freehold and leasehold properties whether you’re buying the property with your own money or using a mortgage.
In Scotland, Stamp Duty is instead called Land and Buildings Transactions Tax (LBTT) and in Wales, it is called Wales Land Transaction Tax (LTT).
Why do people pay Stamp-Duty?
Stamp Duty was originally introduced as law back in 1694 during the reign of William and Mary. It was drawn up on official documents which were required to be stamped by officials to prove payment.
While it was initially a temporary measure of war-time finance, it was so successful at accumulating wealth that it became a permanent fixture of British legislation.
Today, Stamp Duty is designed to cover the cost of the legal documents for the lengthy transaction process involved in purchasing a property.
Express.co.uk has contacted HM Treasury for comment.
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