Landowners 'missing out' on healthy returns in forestry sector

In addition to the attractive returns, the tax system is geared towards helping those who invest in woodland
In addition to the attractive returns, the tax system is geared towards helping those who invest in woodland

Farmers and landowners have been told they are missing out on healthy returns in the forestry sector, which has been boosted by tax incentives and increasing global demand for timber.

Commercial forestry has been the top performing asset in the UK in the past 15 years, with the best woodlands generating returns in excess of 10% a year.

Timber is currently the fourth biggest UK import, but a weaker pound has pushed up import costs, fuelling an immediate rise in timber prices and increased demand for home-grown timber.

Planting land is relatively inexpensive to acquire, and with payment rates of £3,840/hectare for diverse conifers, £5,520/hectare for commercial broadleaves, and £3,200/hectare for native broadleaves, plus enhanced rates in target areas, growing trees can offer better prospects than sheep farming.



Galbraith, one of Scotland’s leading rural management consultancies, said that despite impressive performance, there are actually very few investors active in the market.

'Solid returns'



Philippa Cliff, head of the forestry division at Galbraith, said: “Woodland seems to be considered as an investment option only by a few people in the know.

“The solid returns for investors are likely to continue in the medium to long-term because of three factors – firstly the growing biomass sector which uses wood as a biofuel, secondly, the global demand for timber, which is expected to increase by an additional 33 per cent by 2050, and thirdly the Forestry Commission’s Woodland Carbon Code, which allows forest owners to trade in woodland carbon units.

Ms Cliff added: “Investors can also offset carbon emissions from other business interests against these carbon units, if they so wish.”

In addition to the attractive returns, the tax system is geared towards helping those who invest in woodland.

No Income Tax or Capital Gains Tax is payable on the sale of timber and commercial forests are entitled to 100 per cent Business Property Relief from Inheritance Tax after two years of ownership.