Buy to let investors appear to be as popular as the Grinch at Christmas in Government Circles. The Chancellor unveiled plans to add a 3% levy onto stamp duty paid for second homes or properties bought for buy to let.

This will mean on a house purchase of £250,000 buyers would be normally paying £2500 in stamp duty, but under the new rules the buyer will be paying £10,000 in stamp duty. That’s an increase of £7500 for stamp duty.

The chancellor justified the surprise increase by saying some of the money would be used to help first time buyers, with £60m of the cash raised marked for people in areas where holiday homes have pushed up house prices.
The new rates are expected to raise £625m in the first year, rising to £880m a year by 2010/2021.
The move may also be an attempt to cool the booming buy-to-let market, after the Bank of England recently flagged it up as a threat.
The change is obviously bad news for would be landlords who will need to find more money to pay for this cost or may just avoid buying an investment property.

This could also lead to shortages in the future to stock levels of rental homes, especially at a time supply is already failing to meet demand.

The new rates may also distort the property market in the short term, as investor may race to buy a property before the new rates com in to effect in April.

On the other hand some commentators are saying this move may help first time buyers, as they are likely to face less competition for homes now coming on the market.

People buying houseboats, caravans or mobile homes will be exempt from the new rate. Landlords buying properties costing less than £40,000 will also not have to pay the tax, but homes on the market for that price are few and far between. Finally companies and funds that own more than 15 properties are also likely to be exempt from the new higher rates.

The only other plus side is that landlords can off set purchase cost including stamp duty against any capital gain tax liability when selling a by to let property