When should I downsize my house?

Posted on April 24, 2023

When is the perfect age to downsize? Is it when you’re facing an empty nest, before or approaching retirement, or once you’ve retired and realised your house is too big and burdensome? Whilst individual circumstances vary, research says the perfect age is 64.

Many of us work all our lives for that perfect house and dream lifestyle; after all, an Englishman’s or woman’s house is their castle, is it not? Sometimes it can be emotional to give up the family home, but before it becomes a burden, maybe it’s time to think about the advantages of moving on and doing it on your own terms whilst you are fit and active enough to do so.

Downsizing to release equity

Downsizing allows you to realise equity in your house, turn your asset into cash and with less income in retirement, it can allow you to live more comfortably and do the nicer things in life.

Conveyancing Solicitors at Pearson work with many couples and individuals looking to make money on their properties as they approach retirement.

“We often work with generations of the same family, helping young couples into their first homes, but at the other end advising on later life moves and what to consider,” says Solicitors and Head of Residential Conveyancing, Victoria Marshall.

Things to consider when downsizing

“There are a lot of things to consider when downsizing. It’s not just about a smaller house and garden, with lower bills and less maintenance. If it’s the ‘granny annexe’ option when moving in with family, then I would always urge couples to consider financial protection, safeguarding cash and organising a Declaration of Trust. This is a legal document confirming the ownership terms on which your asset, in this case, the house, is held on trust proportionately and gives you protection should the worst happen.”

“We can also advise on options such as equity release and remortgaging. However, one thing I would caution on is getting the best advice possible if you are contemplating buying a flat as you will need to consider the provisions in the new Building Safety Act 2022,” warns Victoria. Whilst the act is intended for high-rise at risk properties, lender requirements capture leasehold flats as a whole. Therefore, it is important to understand the implications before proceeding with a purchase that may deter future purchasers or lenders.”

Stamp Duty
Inheritance Tax
Capital Gains Tax
Gifted Deposits
A Declaration of Trust
Estate Agents’ fees
Solicitors’ fees
Building Safety Act 2022
Equity Release options
Changes to your Will
Consider speaking to a Financial Adviser

Do I pay tax if I downsize my house?

“If you are downsizing to free up some equity, you still need to think about what taxes you’ll owe and plan your finances accordingly so it’s not a shock. It can cost over a year’s retirement income for some house moves, taking into account moving costs and taxes, so it’s good to factor this in,” she says.

Stamp Duty has to be paid on properties over a certain amount and it’s advisable to check the thresholds, something your solicitor will advise on. If the house is your main residence, you’re not liable for Capital Gains Tax. However, this tax will kick in if it is a second home, inherited property, buy-to-let property or business premises.

“When older couples realise cash from the sale of the family home, it’s sometimes used to assist younger family members to get onto the property market and that is when a gifted deposit comes into play,” advises Victoria. “This is a cash gift used to pay for some or all of a mortgage deposit. As professional solicitors, we can check these for legitimacy and are duty-bound to prove there is no money laundering involved.”

Finally, remember it can be something to look forward to, so treat it as an adventure, a new beginning, and a new stage in your life.

How can we help

If you have a property to sell, or want to instruct solicitors when buying a property then our specialist residential conveyancing solicitors are to help. With friendly no nonsense advice and a team you can trust call 0161 785 3500 or email enquiries@pearsonlegal.co.uk

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.