There has been a great deal of coverage recently following the chancellor’s announcement about the increased rate of stamp duty for buy to let properties, but how much impact will this have?

12 months ago the stamp duty regime changed from a draconian system of simply hiking the level of duty within banded property values to a more tempered and sensible system.  At the time if you purchased a property at £250,000 you would pay 1% stamp duty equating to £2,500.  However if you purchased at £255,000 your stamp duty would be 3% which equates to £7,650.

This seemed extraordinarily unfair to those people whose property values fell slightly over the tax threshold since their property values would reduce just to compensate any potential buyers for an inordinate tax bill.  Property values around this bracket would be devalued by £5000 simply to pass that money over to the tax man.

A new system was introduced which meant that the increased stamp duty rate only increased to a higher percentage for the sum paid in a particular tier, although the percentages were higher the overall result was such that in each property price bracket the buyer would make a saving right up to the next threshold.

The outcome of this change meant that if you purchased a property at £250,000 you would pay £2,500 in stamp duty, but if you purchased at £255,000 you would pay £2,500 for the lower tier and then 5% of the additional £5,000, therefore the overall tax bill would be £2,750.

The system worked well for everyone except those buying properties in excess of £925,000.  At that level the new regime resulted in exponentially increasing stamp duty bills and as a consequence appear to have had dramatic effect on high value properties which are no longer changing hands at the rate they were; clearly not good news for Mr Osborne.

It seems that with an ever growing number of landlords and a high demand for buy to let mortgages that the chancellor has decided to divert its attention to this part of the market with the introduction of an additional 3% levy for anyone buying a property as an investment as oppose to a place to live.

Whilst we still have a national housing shortage it makes sense for the government to try and tip the balance so that potential landlords are dissuaded from buying properties therefore reducing the scope for a bidding war with potential home owners, however it does feel like a punitive tax on those who have previously been advised to invest in property for a secure future – ordinarily and historically a very wise choice.

So will this latest regime have any impact? It is difficult to say for sure, but landlords weren’t dissuaded under the old stamp duty regime where the tax was higher.

Will the change in stamp duty affect landlords’ decisions to continue to invest in and buy property?  On its own I suspect the impact would have been minimal, however combined with recent proposals to remove mortgage interest from the allowable expenses from their rental income it may very much make a lot of investors think twice.

Let’s hope that these investors and savvy spenders don’t simply choose to buy properties abroad and take their contributions to the British economy with them.