Downsizing in retirement: the real numbers
Downsizing — selling a larger family home and buying something smaller — is one of the most common strategies for releasing equity in retirement. The concept is straightforward. The actual numbers, after accounting for all transaction costs, are often significantly lower than people expect.
What you receive from the sale
The sale proceeds are not the full property value. You need to deduct:
- Estate agent fee — typically 0.75–3% of the sale price, subject to negotiation. A £450,000 sale at 1.5% is £6,750 in agent fees.
- Conveyancing (solicitor fees, sale side) — typically £1,000–£2,000 including disbursements
- Outstanding mortgage — the remaining balance is repaid from the proceeds
What you pay on the purchase
- Stamp Duty Land Tax (England) — at standard residential rates (post April 2025 revert): 0% up to £125,000; 2% from £125,001 to £250,000; 5% from £250,001 to £925,000. On a £300,000 purchase: 0% on first £125k, 2% on next £125k (£2,500), 5% on remaining £50k (£2,500) — total SDLT: £5,000. Note: Scotland uses LBTT, Wales uses LTT — rates differ.
- Conveyancing (purchase side) — typically £1,000–£2,000 including Land Registry fees and searches
- Survey — homebuyer report typically £400–£1,000; structural survey £600–£1,500
- Removals and incidentals — typically £1,000–£4,000 depending on volume and distance
Worked example
Selling a £450,000 home (mortgage-free) to buy a £300,000 property in England:
On a headline gap of £150,000 between properties, the actual release is about £132,000 — an 12% reduction from transaction costs alone.
Capital Gains Tax on downsizing
The sale of your main residence (Principal Private Residence, PPR) is generally exempt from Capital Gains Tax under Private Residence Relief. If the property sold has been your only or main home throughout your ownership period, no CGT applies to the gain. If you have periods of non-residence or have had a lodger making your PPR exemption partial, HMRC guidance at gov.uk sets out the calculations.