I'd say it all depends ...
No issues with them switching characters, it often happens that a player's character doesn't turn out the way the want, especially if they're a relatively new player, and I think it's ok to switch and I'd like to help facilitate that as a DM with something more enjoyable for them.
But as for levels and magic items ... that really depends on the situation - the levels the party has reached, what they have, how big an impact/switch it would be, etc. I might or might not have a problem with that.
Sometimes people can switch and blend right in with no issues, sometimes it's best to start all over. Maybe other players in the party feel the same?