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.
What you actually receive from the sale
The sale proceeds are not the full property value. Deduct:
- Estate agent fee — typically 0.75–3% of sale price. A £450,000 sale at 1.5% is £6,750.
- Conveyancing (sale side) — £1,000–2,000 including disbursements.
- Outstanding mortgage — repaid from proceeds at completion.
- Energy performance certificate — required for a sale, typically £60–120.
What you pay on the purchase
- Stamp Duty Land Tax (England) — for properties up to £250,000, the rate is 0% on the first £250,000. For £250,001–£925,000, it's 5%. A £300,000 purchase incurs £2,500 in SDLT.
- Conveyancing (purchase side) — £1,000–2,000 including searches and Land Registry fees.
- Survey — £500–1,500 depending on type. Worth doing on older properties.
- Removal costs — £800–3,000 for a full-service move.
- Adaptation costs — if the new property needs accessibility features or decoration.
A worked example
Illustrative. Total transaction costs of £22,750 — nearly 4% of the sale price. Use the Downsizing Simulator for your own numbers.
The non-financial considerations
Alternatives to a physical move
If the goal is to release equity rather than reduce running costs, equity release (a lifetime mortgage) may achieve a similar financial outcome without requiring a move. Equity release has its own costs and implications — most importantly the compound interest that rolls up over time — but for people strongly attached to their home it is worth comparing both options side by side before making a decision.