UK Forestry Market

UK Forestry Market
 
Into The Woods

31 March 2016, by Savills Rural Research

Landowners who have small pockets of woodland they can’t find a use for may find a market in the amenity woodland owner

 

Amenity woodlands are one of nature’s playgrounds. They don’t have a huge commercial value in terms of timber, yet they are highly desirable as places to go for recreation and enjoyment and many people want a small piece of woodland to call their own. Amenity woods are usually small parcels of land, anything from two to 20 hectares, that are visually appealing and normally close to where the owner lives.

The greatest demand is in southern England and the Midlands near big urban conurbations and in the right location values can reach £10,000–£15,000 per hectare. Value is however not simply measured in price per hectare, but more the ‘affordability’ of the total price, which can lead to some very high looking unit prices.

Over the last 20 years, the popularity of amenity woodlands has steadily increased. Generally, these are small fragmented blocks in lowland areas. Quite often they are a headache from an estate management point of view, but highly desirable to someone who wants woodland for recreation or to add value to a house. For amenity woodlands to be as attractive as possible to buyers, they should have a good visual landscape, a mix of trees, have good access off a county road and be well managed.

A buyer’s main motivation is usually for a sustainable piece of land that promotes wildlife and is good for recreation. However, it is rare that there is no commercial value at all and owners should be able to produce enough firewood for their needs – or even to turn a small profit. Once you have 10 or 20 hectares there’s always an element of timber and the firewood market is very strong. A lot of people have installed woodburners, so there is a continuing demand and because firewood is a lower quality resource, it tends to come from under-managed woodland.

While amenity woodlands were a strong investment 20 years ago, when their initial costs were cheaper, the market has changed and you may not see a lot of capital appreciation. However, commercially managed woodland of any type should attract Business Property Relief from Inheritance Tax so these purchases can still be made tax efficient.

TAX BENEFITS

An efficient investment

Commercial forestry has long been seen as a tax-efficient investment, with the fiscal policies of successive British governments since the 1980s having a greater influence on woodland values than timber prices. Income Tax relief on forestry planting expenditure in the 1980s fuelled investment in woodland creation, whilst shelter from Inheritance Tax has been of primary importance since the 1990s.

The tax benefits of commercial forestry remain. Income generated from the sale of timber is exempt from Income Tax and Corporation Tax, making forestry an effective means of converting capital into tax free income. Commercial forestry also qualifies for 100% Business Property Relief once held for two years, so that if held at death there is no Inheritance Tax payable on the total value of the land and the trees.

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Key Contacts

Ian Bailey

Ian Bailey

Director
Rural Research

Savills Margaret Street

+44 (0) 207 299 3099

 

Nicola Buckingham

Nicola Buckingham

Associate
Rural Research

Savills Margaret Street

 

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