Forest Land Investment
When buying land in the UK, there are various types of land considered prime. However, one type of land that is often overlooked is the forest, which can actually provide exceptional tax breaks and a great investment on money. In fact, investing in forest offers a number of benefits to include raw materials being used by various industries, providing a natural habitat for wild animals, and combating carbon dioxide pollution.
Now, when you consider all the environmental benefits coupled with forest being tax free, you can see why this makes an excellent option for buying. To give you an idea how incredible the return is on forest, consider that today, this type of investment will generate between 4% and 5%, which is after inflation and costs. Now, this investment is broken down between appreciation for woodland and the return of timber crop.
While return is great, you need to remember that there are no guarantees. For instance, when timber prices are up, then the return is great but unfortunately, prices can be volatile. In addition, timber is a long-term prospect. In other words, since timer does not yield annual crops, you must wait to enjoy the return. Just look at the Sitka spruce as an example. This particular tree when planted for commercial use will take up to 40 years to produce. Once harvested, the entire forest is replanted and the cycle starts over again.
You will also find that forests can contain different types of trees, as well as different age trees. That means income is not consistent. Most often, the type of people you see investing in forestland in the UK are those individuals who have some money on hand, because it takes, time to reap the benefits. Now, you need to remember that timber for improved UK growers has improved, meaning they are now in a position to compete with European producers. Most of this is because of the increase of the Euro against the Pound, along with imports costing more.
With this, we have seen prices for timber in the UK rise to almost 6% although the annual average gain since 2004 has only been 1.9%. Keep in mind that you would enjoy tax breaks on all income and capital gains associated with forestry investment. Therefore, you could even roll over capital gains and investments into forestry hold, deferring the tax, which you would otherwise have to pay.
Another consideration associated with forestland is that if you have owned the land for two years or longer, you can leave the land to your heirs without them having to worry about paying inheritance tax. If you were to die without disposing of your investment, then deferred capital gains tax debts are automatically cancelled. However, tax breaks on only for commercial forestry investments that are used for business, meaning investors would need to commit significant funds.
When it comes to investment in forestland, you have another option of pooling cash with other buyers. In this case, you might see a company pulling together to purchase and investment in forestry, which means a smaller investment for individuals. While this might not be an option for everyone, it is certainly something to consider.
Let us look at land in the UK. For starters, in 2005, prices on rural land dropped 5%. That means transactions hit a 20-year low simply because people sat back and waited to see what the European Union would put into effect. However, remember that rural land does have potential for being a good investment. Now, if people were to begin buying farmland with city bonuses, things could change. Traditionally, farmland has been someone people with accumulated wealth show interest in buying.
Another type of investment is agricultural, which is a good option in that it has similar tax breaks to what you would enjoy with forestry. For instance, there is a 100% relief on inheritance tax, along with some capital gains tax advantages. The interesting thing is that agricultural investments are advised but they usually start at 1m. That means that even pulling resources to buy, as you would see with farmland, investors would each need to pitch in 100,000 minimum.
Finally, you have farms that have secure tenants, which is another option for investment. Many times, you will see buyers depending on the potential for long-term development of plots on the land. In this case, you want to avoid companies that offer plots without a planning permission. The reason is that property investment is not regulated by the city officials.
Therefore, you find an increase in the number of land bankers snatching up small plots that are then sold to unknowing investors, saying permission could be granted in the future. Unfortunately, individuals who buy these plots soon realize that planning permission ever being granted is unlikely.
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