Are there taxes I have to pay when I downsize in 2025?
Before you make the move, it’s crucial to understand the tax implications…
Downsizing can be one of the smartest financial and lifestyle decisions you make. Whether you’re looking to cut household costs, free up equity, or move into a more manageable space, selling your current property and buying a smaller one can provide both financial freedom and peace of mind.
In the UK, downsizing often involves taxes such as:
- Stamp Duty Land Tax (SDLT) when you buy your new property
- Capital Gains Tax (CGT) if you profit from selling a second property
- Inheritance Tax (IHT) depending on how you manage the proceeds
In this comprehensive 2025 guide, we’ll explain:
The main taxes to consider when downsizing
- Exemptions and allowances that may save you money
- How changes in government policy affect downsizers in 2025
- Why more homeowners are choosing to sell fast with We Buy Any House
By the end, you’ll know exactly what to expect and how to downsize without being caught off guard by unexpected costs.
Why downsizing in 2025 is so popular
Downsizing isn’t just moving into a smaller home. It’s about:
- Releasing equity: In 2025, older homeowners who downsize are unlocking an average of £85,000 in equity.
- Cutting bills: With energy prices still high, smaller homes are cheaper to run.
- Simplifying life: A smaller property means less maintenance and stress.
- Future planning: Downsizing earlier gives more control over retirement finances and estate planning
Before you can fully benefit, you need to understand what taxes might apply.
What is stamp duty, and how does it apply when downsizing?
Stamp Duty Land Tax (SDLT) is the tax you pay when purchasing a property over a certain threshold.
In 2025, the rates are as follows:
- 0% on properties up to £250,000
- 5% on £250,001 – £925,000
- 10% on £925,001 – £1.5million
- 12% on anything above £1.5 million
For example
If you downsize from a £600,000 property to a £300,000 property, you’ll pay 5% on £50,000 (£2,500 Stamp Duty).
Top tip: If you’re a first-time buyer downsizing after inheriting a property, different rules may apply.
If you want to avoid the hassle of Stamp Duty delays, you can sell fast with We Buy Any House, receive a guaranteed cash offer, and move with confidence.
Do I pay Capital Gains Tax when downsizing?
Capital Gains Tax (CGT) is charged on the profit you make when selling a property that is not your main home.
Selling your main home? Usually exempt under Principal Private Residence Relief.
Selling your second property? CGT may apply at rates of 18% pr 28% depending on your income tax bracket.
For example
If you sell a second home for £250,000 that you originally bought for £150,000, you’ve made a £100,000 gain. After allowances, you could owe up to £28,000 in CGT.
If you’re selling you main home to downsize, you typically don’t pay CGT.
Could downsizing affect inheritance tax?
Downsizing can also affect inheritance tax (IHT) planning.
IHT is charged at 40% on estates above £325,000, or £500,000 including the Residence Nil Rate Band if you pass your home to children or grandchildren.
By downsizing, you may free up cash that still forms part of your estate, potentially increasing IHT liabilities.
However, downsizing relief allows families to keep the Residence Nil Rate Band even if the family home was sold or downsized, provided assets of equivalent value are passed to direct descendants.
Other costs to consider when downsizing
While most homeowners focus on taxes when downsizing, there are a range of hidden costs that can significantly impact the money you walk away with. These expenses can add up quickly, especially if you’re moving from a high-value property or relocating over a longer distance.
Here are the main costs to budget for in 2025:
Estate agent fees
When selling through the traditional market, estate agents typically charge between 1% and 3% of the property’s sale price. For example,
- On a £300,000 home, you could pay between £3,000 and £9,000
- On a £500,000 home, fees could rise up to £15,000 or more
Selling to We Buy Any House eliminates this cost entirely; we never charge estate agent fees, meaning you keep more of your money.
Solicitor and conveyancing fees
Solicitor fees for conveyancing typically range from £800 to £1,500, depending on property value and complexity. Any additional charges for searches, leasehold properties or complicated chains.
With We Buy Any House, all legal fees are covered. This can save you up to £1,500 instantly and reduce the hassle of managing your own solicitor.
Removal and moving costs
Removal companies charge based on distance, volume of belongings and whether you require packing services. Costs in 2025 typically range from £500 to £1,500, but long-distance or full-service moves can exceed £2,000.
Top Tip: Downsizing gives you the perfect opportunity to declutter. Selling or donating unwanted items can lower removal costs and make your move more manageable.
Mortgage related fees
If you have a mortgage on your current home, downsizing tends to trigger additional charges:
Early repayment charges (ERCs): Some lenders charge up to 5% of the remaining mortgage if you pay it off early.
Arrangement fees: if you’re switching to a new mortgage product for your downsized property, expect a fee of £1,000-£2,000.
Valuation and survey fees: Required by lenders before approving new loans.
These costs can come as a surprise, especially if you’ve been locked into a fixed rate mortgage.
Renovation or preparation costs
Many homeowners invest in small improvements to enhance the marketability of their property. This could include:
- Fresh paintwork
- Minor repairs
- Garden tidying
- Staging for viewings
While these can improve the sale price, they also add upfront expense.
Ongoing bills while waiting for a sale
Traditional property sales in 2025 often take 4-9 months to complete. During this time, you’re still responsible for:
- Council tax
- Insurance
- Utility bills
- Maintenance costs
These holding costs can eat into the equity you release from downsizing.
Why homeowners choose We Buy Any House instead
When you add up estate agent commissions, solicitor fees, removal costs, mortgage penalties and months of ongoing bills, downsizing through the open market can cost thousands of pounds.
That’s why many downsizers in 2025 are turning to We Buy Any House. We offer:
- Zero estate agent fees
- Free legal services
- Fast sales to avoid months of holding costs
- Guaranteed cash offers with no hidden charges
By removing these extra expenses, We Buy Any House ensures that more of your equity stays where it belongs, in your pocket.
How downsizing works with We Buy Any House
One of the biggest frustrations homeowners face when downsizing is the time it takes to sell through traditional estate agents. In 20205, the average property sale in the UK can still take anywhere from 4 to 9 months, and that’s if the chain doesn’t collapse. For many people looking to free up equity, cut bills, or move into a more manageable property, that timeline is simply too long.
With We Buy Any House, the downsizing process is much faster, simpler and stress-free. Here’s how it works:
Get a free cash offer
Simply provide details about your property, and we’ll give you a no-obligation cash offer within 24 hours of your consultation. There are no hidden charges, and you’re under no pressure to accept. It’s about giving you clarity from the very beginning.
Agree to a completion date that suits
Whether you need to sell in as little as 7 days or would prefer a flexible timescale that lines up with your downsizing plans, we’ll work around your schedule. Unlike the open market, you’re in control. No waiting around for buyers, no last-minute dropouts.
We cover all legal fees
With We Buy Any House, we take care of all the legal fees, saving you thousands and removing yet another headache from the moving process.
Receive your funds quickly
Once the sale is complete, the funds are transferred directly to your bank account. That means you can put down a deposit on your downsized home straight away, pay off debts, or simply enjoy the financial freedom that comes with unlocking equity.
Why this matters for downsizers
When you’re downsizing, speed and certainty are everything. Many people want to:
- Release equity quickly to boost retirement savings
- Reduce monthly bills immediately rather than waiting months
- Move on with life without the stress of a drawn out sale
With We Buy Any House, you don’t just sell your property, you gain peace of mind knowing the sale is guaranteed, fast and hassle free.
Ready to downsize without stress? Get your free cash offer today from We Buy Any House and move on your terms.
Downsizing in divorce, retirement or inheritance situations
Downsizing isn’t always just about convenience; it often comes during life’s biggest turning points. Whether you’re facing a separation, planning for retirement, or managing an inherited property, selling your home can feel overwhelming. That’s where downsizing and choosing the right selling route becomes essential.
Downsizing during a divorce
Divorce is already emotionally draining, and disputes about the family home can make things worse. Selling a large property and moving into smaller, separate homes is often the cleanest solution. But relying on estate agents can drag the process out for months, which can increase conflict.
With We Buy Any House, you can sell quickly, get a fair cash offer, and divide the proceeds without waiting months for a buyer.
This allows both parties to move forward with financial clarity and less stress.
Downsizing for Retirement
As retirement approaches, many homeowners realise their current property no longer suits their needs. A large house can mean higher energy bills, bigger maintenance costs, and unnecessary space. Downsizing can free up tens of thousands in equity, funds that can be used for travel, family support or care costs.
With We Buy Any House, retirees can unlock their equity in as little as 7 days, avoiding estate agent fees and long waiting periods. This means you can start enjoying your retirement plans without delay.
Downsizing after inheritance
Inheriting a property can be a blessing, but it can also be a financial burden if the home is large, old or expensive to maintain. Council tax, insurance, and upkeep costs can quickly add up, especially if you already own a home yourself.
For many families, the simplest option is to sell the inherited property and downsize into something more manageable or split the proceeds among heirs.
By selling to We Buy Any House, you avoid estate agent fees, benefit from a guaranteed cash sale, and save months of waiting while probate and inheritance issues are being finalised.
Downsizing in 2025: The Big Picture
The UK property market in 2025 looks very different from the boom years of the early 2020s. After rapid house price growth, higher mortgage rates and fluctuating buyer demand, the market has cooled.
Downsizing has become more than just a lifestyle choice; it’s now a practical financial strategy.
For many, the decision to sell a larger home and move into something smaller is driven by a combination of factors:
- Rising energy costs: Heating and maintaining a large property is increasingly expensive. A smaller home can cut annual bills by thousands of pounds.
- Retirement planning: Releasing equity provides a valuable financial cushion for travel, leisure or care expenses.
- Simplicity and lifestyle: Fewer rooms to clean, less garden to maintain, and reduced stress overall.
- Financial security: Downsizing provides cash reserves at a time when pensions and investments may feel uncertain.
But while the benefits are clear, downsizing isn’t just about selling and moving. There are several financial and legal considerations to account for in 2025, including:
- Stamp Duty Land Tax (SDLT): Payable on your new property if it’s worth more than £250,000.
- Capital Gains Tax (CGT): Relevant if you’re selling a second property rather than your main home.
- Inheritance Tax (IHT): Downsizing can impact estate planning and the amount your family inherits.
Other fees and moving costs: Estate agent fees, solicitors’ charges, removals, mortgage fees, and ongoing bills while waiting for a buyer.
This is where choosing the correct selling route becomes critical. Many homeowners are turning to We Buy Any House in 2025 to cut through uncertainty. By offering a fast, guaranteed cash sale, we avoid months of holding costs, unpredictable buyers, and the stress of the open market.
With careful planning and the right selling strategy, downsizing in 2025 can unlock significant equity and improve your quality of life. By preparing ahead and considering all costs, you’ll enjoy the financial and lifestyle benefits of moving into a smaller, more manageable property.