There are lots of terraced houses like that where I live (northern city), where it’s quite normal to have a bathroom coming off the bedroom and a downstairs toilet, so that seems fine to me.
We live in a similar sized house (two adults and DD aged 8), and it can feel crowded, plus storage space is limited.
I don’t like the way it’s all open plan downstairs - with the front door and the stairs opening into that main room, that could be cold in the winter. I’d want to partition off the door/ stairs area, and possibly create an under-stairs cupboard too. Do either of you need to WFH? There’s no privacy downstairs so you would have to use a bedroom as an office.
From the floor plans, it looks as though it has already been extended to create a bigger kitchen, so you might not be able to extend further under permitted development rights.
Is there space for a car to access the garage - it doesn’t look like it from the photos? Is the parking on street/ residents only?