People over 65 ‘need the right incentives’ as inheritance and stamp duties stop ‘scaling up’ | Personal Finances | Finance
It appears that retirees do not have enough options to move to a house more suited to their needs, with a low number of bungalows and retirement homes being built. The costs associated with moving can also deter retirees.
Addressing the country’s housing crisis must include a greater focus on building new homes for the elderly and policies to help them get the right size, Propertymark told the UK government.
The UK has over 12.5 million people aged 65 and over in 2020 – 18.65% of the population, which will rise to 21.8% by 2030, according to figures from the Office for National Statistics.
But while a third of seniors have indicated they would like to move out of their current homes, senior housing is scarce, with just five percent of those over 65 living in specialized housing.
Propertymark believes that the lack of housing options for older people, combined with government policies that discourage them from moving, is causing many people to stay in unsuitable and often under-occupied housing.
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Not only could this worsen wider housing supply problems, but unspecialized houses can also pose a serious threat to the health and safety of older people, potentially putting additional and unnecessary strain on health and care systems. social protection.
New bungalow construction remains low, with less than 2,000 bungalows built in 2020, representing just 1.57% of all homes. By 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 senior housing units in the UK as of June 2019, which is just five percent of the population over 65, according to a study by the Elderly Accommodation Counsel.
Eleanor Bateman, Head of Policy and Campaigns at Propertymark, said: “We need a housing package that includes more specialized housing for the elderly, as well as the right incentives for a good size.
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“Currently, seniors are not inclined to relocate because government policies just don’t make it easier. Faced with a potentially large property tax bill – combined with other measures such as the zero-rate residence bracket for tax savings – it’s no surprise that many seniors choose not to move.
“Additionally, the lack of housing options means that even those who wish to move often end up staying put because there simply aren’t enough suitable and affordable properties for them in the housing market.
“This lack of supply, often associated with service fees or event fees, further exacerbates affordability issues.
‘If the UK government is serious about tackling the UK housing shortage it needs to rethink its tax policy which is hampering market movement and providing the elderly housing the country needs so that our existing building stock is used. more efficiently. , and the right sizing becomes an affordable and realistic option.
What is the zero rate band?
The zero rate bracket is the threshold above which inheritance tax is due. Assets can be transferred up to the value of its zero rate bracket without creating an inheritance tax bill. The zero rate bracket is currently £ 325,000 and will remain at that amount until April 2026.
The zero residence rate bracket is an additional amount that could be passed on tax-free to the value of the family home. The zero residence rate bracket 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 buying land or residential property in England or Northern Ireland.
It is paid on any property that costs over £ 125,000, but for first-time buyers that 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.
Buyers of second homes will always pay an additional three percent stamp duty on any property that costs over £ 40,000. This tax applies to both freehold and leasehold properties, whether you buy the property with your own money or using a mortgage.
In Scotland, the stamp duty is called instead 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 a law in 1694 during the reign of William and Mary. It was established on official documents which had to be stamped by officials to prove payment.
While initially a temporary wartime financing measure, it was so successful in accumulating wealth that it became a permanent part of British law.
Today, stamp duty is designed to cover the cost of legal documents for the lengthy transaction process involved in buying a property.
A DLUHC spokesperson said: “Adequate housing helps older people live independently longer and we are working with councils to meet the housing needs of older people.
‘We are also investing over £ 12bn in affordable housing to help people at every stage of their lives and, through the Disability Facilities Grant, we have provided accommodations – such as stairlifts and ramps – to more than 450,000 people since 2010. »