HM Treasury has rejected a proposal to offer stamp duty relief to homeowners moving to smaller properties, saying it has no plans to introduce further relief for downsizers.

The Treasury set out its position in a written response dated 8 September to a costed proposal submitted by Joel Hagan, founder and chief executive of property portal Frontdoor.

Hagan had proposed a “Rightsizing Relief”, which would provide a capped exemption from Stamp Duty Land Tax (SDLT) for owner-occupiers moving from a larger home to a smaller property. The proposal included a cliff edge intended to prevent the relief being exploited.

In its response, reference TO2026/16136, the Treasury said most homeowners looking to downsize were likely to have equity in their existing property and were already exempt from Capital Gains Tax on their main residence through Private Residence Relief.

It also argued that, for most downsizers, the stamp duty payable on the property they were buying would be relatively small and, in many cases, lower than their estate agent’s fees.

The Treasury said stamp duty raises about £12 billion a year and that introducing another relief would be likely to result in a significant cost to the Exchequer. It said the government had no plans to introduce further relief for people looking to downsize.

PROPOSAL CLAIMS £180M NET GAIN

Hagan’s proposal was accompanied by a financial model which argues that the relief could ultimately generate more tax revenue than it costs.

Under its central assumptions, the model forecasts 100,000 rightsizing moves a year, resulting in £625 million of forgone stamp duty but generating £805 million through subsequent property transactions and associated activity. That would produce a net annual gain to the Exchequer of £180 million.

The model assumes each move unlocked by the relief would generate about 2.5 subsequent transactions in a property chain, with half of those discounted on the assumption that they would have taken place anyway.

Hagan said: “The Treasury has costed this statically. Stamp duty is a tax on moving. It raises nothing at all from a house that does not change hands, so any costing that ignores the transactions a relief creates will always produce a large negative number.”

He added: “A downsizer does not move alone. They sell a four-bedroom house to a family, who sell a semi to a couple, who sell a flat to a first-time buyer.

“One exempted purchase at the top generates taxed purchases all the way down. This releases family housing that already exists, without a single planning application or a brick. It gets things moving now which is what the cost of living crisis demands.”

The Treasury’s decision comes against a softer housing market. Lloyds reported this month that the average UK house price fell to £298,468 in August, marking the first annual decline since November 2023.

Housing stock is running about 5% above its level a year earlier, while lenders including HSBC and NatWest have increased mortgage pricing in recent days. The average two-year fixed rate has reached 5.63%.

The Bank of England’s next interest rate decision is due on 17 September.