Downsizing may become unaffordable for families across the country if the stamp duty discount is not extended, experts have warned.
The average bill for a downsizer is currently £2,500, but estate agent Hamptons has said this could rise to £2,850 if the discount is axed.
Industry experts have warned the move will only create more housing shortages as owners of larger homes will have no incentive to move.
According to Hamptons, the average downsizer sold their home for £419,000 and paid £257,000 for a new one in 2024.
It is feared that Rachel Reeves could scrap the stamp duty discount in the upcoming budget on Wednesday.
Aneisha Beveridge, of Hamptons, told The Telegraph the stamp duty rise next year will mean nine in 10 movers will be pulled into paying the tax, up from just over half today.
The graph shows that stamp duty could be set to soar once again in 2025 if the discount is not extended past April
Nine out of 10 movers will be pulled into paying the tax, up from just over half today.
She added: As the burden of stamp duty has risen over time, it has become more of a consideration for downsizers, adding to a list of reasons to stay put.
The nil-rate threshold was temporarily increased from £125,000 to £250,000 by the Conservatives, and from £300,000 to £450,000 for first-time buyers.
This is due to expire in March and Chancellor Rachel Reeves will have to make a decision on whether it is extended past April.
Last week, property guru Kirsty Allsopp criticised the expected changes in the budget, saying it would spark chaos in the housing market.
Purplebricks managing director Jo Pocklington said: Ending the stamp duty relief could discourage people from downsizing, which means there would be fewer properties available to buy – and this usually increases house prices.
Paul Dales, of Capital Economics, warned that the change could cause a temporary spike in house prices, as sellers race to avoid a higher tax bill in April.
Chris Sykes, of mortgage broker Private Finance said that the move could put off selling for many clients who have larger houses.
While Toby Leek, president of estate agent trade body Propertymark, said that elderly homeowners were being put off from downsizing, with some unable to find anything between a large house and a one-bedroom flat.
About 85 per cent of owner-occupied homes in the UK have at least one spare bedroom, making them under-occupied, according to research by Barclays.
The bank urged the government to offer households grants or the ability to offset moving costs against stamp duty to encourage people to downsize.
Last year, the Treasury raised £19m from the land tax, up from £18m the year before.
A government spokesman said: We do not comment on speculation around tax changes outside of fiscal events.