Downsizing in Later Life: A Practical Moving Guide

Less space, more decisions, and one inheritance tax rule with a hard cut-off date. What a downsize really costs and the order to do it in.

Downsizing a house is a different job from an ordinary move, and this downsizing guide is written around the two things that make it different. First, you are almost always moving into less space than you are leaving, so the decisions about what to keep have to be made before the removal firm quotes, not on the day. Second, there is a tax rule attached specifically to selling a home and buying a smaller one that most people only hear about after a bereavement, when it is too late to have planned around it.

What downsizing actually costs

The pleasant assumption is that downsizing releases equity. It usually does, but the gross gap between the two prices is not what lands in the account. Work backwards from the sale price and subtract the following.

• Estate agent commission. Typically a percentage of the sale price plus VAT, with sole agency cheaper than multi-agency. Get the figure in writing, including whether it is charged on the agreed price or the completion price.
• Conveyancing on both transactions. You are selling and buying, so you pay for both. Our Sussex conveyancing fees guide sets out the usual line items and the disbursements that get added on top.
• Stamp duty on the purchase. Even a small flat can attract it. On a £300,000 purchase as your only home you pay nothing on the first £125,000, then 2% on the next £125,000 and 5% on the last £50,000. The current SDLT residential rates on GOV.UK are the authority. If you complete on the purchase before you have sold, you will pay the additional-property surcharge and have to reclaim it later.
• Removals. Downsizing moves are often cheaper than like-for-like moves because there is less to carry, but only if the sorting is done first. See removal costs in Sussex for the current bands.
• Storage. Very common on a downsize, because the new home rarely swallows everything on day one. Storage costs add up quietly, so treat any storage as a decision deferred rather than a decision made.
• Disposal. House clearance, tip runs, and the cost of getting a three-piece suite out of a first-floor room. Charity collections are free but selective, and most will not take upholstery without a fire label.

The inheritance tax rule worth knowing before you sell

The residence nil rate band is an extra inheritance tax allowance that applies when a home is left to direct descendants: children, grandchildren, step-children, adopted or fostered children. It is worth up to £175,000 per person on top of the ordinary nil rate band, and it tapers away by £1 for every £2 that an estate is worth over the £2 million taper threshold.

The obvious problem with downsizing is that you may no longer own a home worth enough to use the full allowance. That is what the downsizing addition exists to fix. HMRC's guidance on how downsizing, selling or gifting a home affects the additional threshold sets three conditions, all of which must be met:

1. The person sold, gave away or moved to a less valuable home on or after 8 July 2015. Anything disposed of before that date cannot be counted at all.
2. The former home would have qualified for the residence nil rate band if it had been kept until death.
3. Direct descendants inherit at least some of the estate. If there is no home at the date of death, the addition is still available as long as some of the estate passes to direct descendants.

The addition cannot exceed the residence nil rate band that would have been available had the downsize never happened. Keep the completion statement, the sale price and the date somewhere your executors will find them. Reconstructing a 2019 sale price from memory in the middle of probate is exactly the sort of avoidable work that costs a family money. This is a general summary and not tax advice; on an estate anywhere near the £2 million taper, take proper advice before you exchange.

Sell first or buy first

Downsizers have more freedom here than most movers, and it is the biggest practical advantage you have. Selling first and moving into rented, or in with family, turns you into a cash buyer with no chain. In a slow market that is worth real money on the purchase price, and it removes the risk that your buyer pulls out while you are committed to a purchase.

The cost is a second move, and a second set of removal charges. Roughly, if the discount you can negotiate as a chain-free buyer exceeds the cost of the extra move plus a few months' rent, selling first wins. In a fast-moving market with little stock at the size you want, it can leave you homeless in the market for months instead. The honest answer depends on how much stock there is in the towns you will accept, which is a question for a local agent rather than a national statistic.

The sorting, which is the actual work

Moving from four bedrooms to two means somewhere between a third and a half of what you own is not coming. That is not a packing problem, it is a decisions problem, and it is the one that goes wrong.

The method that works is to measure first and sort second. Get the floor plan of the new place, mark the wall lengths, and check the pieces you assume are coming: the dining table, the wardrobe, the piano, the corner unit. Large case furniture is usually the thing that does not fit, and finding that out on moving day is expensive. If you are taking a piano, read our guide to moving one first, because it is a specialist job priced separately.

Then work room by room rather than category by category, and give yourself a real deadline for each. Books, paperwork and the loft take longer than anyone expects. Our decluttering guide covers the sequence, and the moving house checklist covers the admin that runs alongside it.

Three practical notes. Charity shops will collect furniture but need a fire safety label on anything upholstered. Auction houses are worth a call for anything that might be of value, but be realistic: brown furniture is not what it was. And family members who say they want a piece should be asked to take it before you move, not after.

Choosing the new place

Bungalows, ground-floor flats and purpose-built retirement developments all get looked at, and they behave very differently.

With a leasehold flat, read the lease properly, not the brochure. Check the service charge, the ground rent, the reserve fund contributions and whether there is a major works programme coming. In retirement developments specifically, look for a deferred fee, sometimes called an event fee, exit fee or transfer fee, payable when the property is sold or sublet. It can be a meaningful percentage of the resale value, it is set out in the lease, and it materially changes what your estate is worth. A conveyancer should flag it, but ask about it directly.

Also ask what happens to the property if you need care later, whether the flat can be let, and whether there are age restrictions on who can buy it from you. A restricted resale market is the main reason retirement flats sometimes sell slowly.

A workable timeline

Sussex is a good place to do this. The county has a large stock of smaller property in the towns and along the coast, and a well-supplied removals market, which keeps quotes competitive. Start on the Move Sussex home page for the local cost guides and the area pages.