Mayor of London and former Henley MP Boris Johnson is calling on the Government to change the tax rules to encourage elderly people to downsize to smaller homes.
Mr Johnson says people over the age of 65 should be excused from paying inheritance tax when they sell their homes. He says this will make them more inclined to move to smaller retirement properties and provide more family homes for estate agents to sell in order to meet the high demand in London.
He said many old people stay put in homes that are too large for them because of the considerable chunk of their profits they would lose to the taxman. The idea for an inheritance tax reduction or exemption for elderly people has already been suggested to ministers, according to the deputy mayor for housing, Richard Blakeway.
Speaking to the Times Mr Blakeway said older people who decide to move should receive tax benefits. He said those thinking of selling up and moving somewhere smaller often fear what will happen to the money they receive.
At the moment all properties that are sold for more than £325,000 incur a 40 per cent inheritance tax bill. Mr Blakeway says it is no wonder that people are not selling up when they lose that much money and the system needs to be looked at. A good alternative to making over 65s exempt of inheritance tax would be scrapping stamp duty when downsizing, he suggests.