To wonder why agricultural land is worth so much?

Agricultural land is worth less than land that is given the go ahead for property development however prices have beeen rising recently because rich people and businesses have bought and are buying land to avoid paying inheritance tax as they can rent it out as agricultural land and get exempt. also I think there is some other tax they can avoid- can’t remember what it is though. However for farmers most are tenant farmers so rent the land from a big land owner or they’ve had it in their family for generations so never paid for it and it would have been very cheap then. Some farmers don’t even make profit each year and are sibsidiwed by the government to keep going as they are vital eg dairy farms. Sheep farming is very poorly paid in returns, 22k is the average. Crops is where the money is as but it’s very dependent on the weather- some years you might just cover your costs. Farmers are land rich and cash poor. The farmers that have done well are the ones who have multiple fingers in multiple pies- eg they might have converted some barns on their land into holiday lets. It really angers me when people think farmers are rich. There are rich people driving range rovers in the countryside but most are not farmers!!

There seems to be a bit of defensiveness from farmers around discussing land values in this context because I'm guessing in many cases their objection to the change to Agricultural Property Relief is not the possibility of them paying IHT (most still won't) but about the value of their land dropping (from an artificially inflated high) but they can't come out and say this.

More expensive previously because it was a bit of a tax dodge, and if you sit on it for long enough eventually it may become buildable 🫰🫰

If all the IHT avoiders are pushing up the price of agricultural land by artificially inflating demand, then surely it's a good thing for farmers in the long term to disincentivise this?

Unfortunately the high price of land means that when a farmer dies, the family will need to raise the inheritance tax money somehow.

For a standard family above the threshold, chances are that adult children are already gone and there's usually the chance to sell the big old family home and downsize without that impacting on your livelihood.

In farming at least some of the adult offspring will usually still live on the farm, often raising their own families in a different house on site - this is so those of the next generation who want to, can live close to work (which often starts at silly o'clock or even all-nighters, especially for livestock farming). Certainly for smaller i.e. non-massive corporate farms, the income is usually sufficient to support the family living there and in a good year maybe put a little aside for the proverbial rainy day (e.g. drought, flooding, pests, TB, Foot & Mouth outbreaks etc). So to pay a big chunk of inheritance tax on the farm they will need to sell off say 20% of the land - which means next year there's 20% less income to support the same number of people. Add in the potential loss of the economies of scale, and you can see how that is no longer viable. Then the same thing happens when the next generation die.

So maybe in a hundred years or so it might help farmers looking to increase their land, move, or newly come to farming, for the current few generations of farmers this is completely devastating. They will lose their homes and their livelihood, and having spent their entire lives working on the family farm they are unlikely to be qualified for any other job.

I don't see why that's so hard to believe. It's an issue most people would have very little knowledge on, and is suddenly all over the news. Why would it be the case that anyone asking about it is being disingenuous?

Because there have been numerous threads about it with detailed explanations which the op could’ve read.

Yes, but what is proposed is still a better deal than not so it doesn't prevent private investment and it doesn't help farms whose land value is over priced.

And no matter what anyone says, that's the truth of it all. The policy is shit for everyone and solves nothing.

@MrsBennetsPoorNerves

Why would you want to increase land taxes . Not everyone with land is a Clarkson what about those with a couple of pony paddocks or someone wanting to build a home for their family .
Not everyone has a gazillion acres .

I don't see why that's so hard to believe. It's an issue most people would have very little knowledge on, and is suddenly all over the news. Why would it be the case that anyone asking about it is being disingenuous?

This is a genuine question because I'm trying to understand.

Sure.

It is simple supply and demand, no one is making more land.

Purchases of land are not always farmers, estimates of recent years sales in many estate agents who specialise in land have the figures somewhere between 25 and 50% of land purchases, dependant on where you are, are private non-farming investors.

Supply of land to buy each month/year is very limited because farming is often a very long term business. I know one farm that has not been for sale since the 12th century, it's still in the same family's hands. They have documents going back that far for the core part of their land. This is a small holding and on flood plain/water meadow system so not useful for anything else.

Supply of land near urban centres is more desirable and more highly priced.

Add in tax relief for all who own land, not just land that is farmed, and land is even more desirable to private purchasers.

Nothing complicated about it ... limited stock + high demand = high prices

Land that has not been built on close to existing development is becoming scarce . Land can generate an income . Planning permission may be given for change of use . Land may be bought speculatively for future development. The denser people are packed into together the more attractive ' space ' is .

Income from 50 ha wheat is therefore ~£80,000
Cost per ha to purchase/sell land is ~£25,000... so easy to see why 'a bird in the hand' mentality is creeping in with farmers. A farm of 50 ha = £1.25 M. Most people would rather sell that and have a guaranteed cash in hand, rather than 'maybe' making £80,000 each year (weather, pests, disease etc, permitting).

Just to clarify for some people, the maths above is looking at the price you can sell the wheat for. To have a better way to look at this, you really need all the costs of producing that wheat e.g. machinery, fuel, fertilisers, staff wages, seeds etc. Oh and of course there's the farmer themselves and their family to support. Than there's the overheads of the various legislative work that a farmer needs to do, depending on what the farm produces. So you aren't talking about a salary equivalent of £80k by any means!

Plus the smaller a farm is, the higher proportionally these costs are as there's no bulk buying and you still need at least one of everything whether you have 5Ha or 50Ha. The bigger farms can justify the cost of much larger machinery too, which can do the work much more efficiently.

The impact of disease is also much higher on livestock farms. Not only do the farmers have to pay for inoculations and disease testing, but any illness means that animal is slaughtered at cost to the farmer and no movement is permitted to/from that farm for a significant length of time - meaning they can't even sell their produce.

See I’m not sure about it all. Because while I completely get the attraction of passing something down with no IHT it’s not actually “worth” anything to the person inheriting it unless it’s making a profit. Or unless you can sell it to someone else fairly quickly for cash.

dh owns a few fields which are worth about 100k, he inherited them over 20 years ago. They have been of no benefit to us at all so far. We don’t farm them at all. Someone we know keeps some horses on them. If anything they have cost us money for drainage repairs, etc. having an asset might be great but it’s not money in the bank.

i guess one day we could maybe sell them, but if they don’t bring in a profit who would want to pay for them?? We have a vague hope we might get planning permission for the fields which looks increasingly likely as time goes on (the village has extended around our fields) and then they’re likely to be worth even more than the current value.

But can’t see Clarksons very arable large fields getting planning permission for housing. So if one day his kids need to sell some fields to pay an IHT bill then you run the risk firstly of nobody wanting/needing a few fields…..so they then can’t pay the IHT without selling the whole farm. How many people can afford a farm like that? Multiply that by all the farms across the country every time a farmer dies. I don’t see people lining up to be farmers at that level. Or a few fields are sold and you end up with more and more smaller farms which raises the risk of less profit and more unproductivity.

I guess the land Dyson owns might make more of a profit as its prime Lincolnshire agricultural land.

So what Labour have done is make the purchase of land by Dyson/Clarkson multi millionaire types, less attractive so the price will fall which will benefit farmers who actually want to farm the land.

It is a very thinly traded market; only 2-300 farms 'publicly marketed' each year apparently, and farmers only account for about half of buyers (according to Strutt & Parker summer 2024 farmland report). Doesn't take many 'lifestyle' or inheritance tax driven buyers to impact the market I guess.

Bringing the value of the land more closely into alignment with what someone farming it can expect to make from it makes sense, and brings "entry barriers" down. There will be some problems though - for examples farmers who have borrowed money secured on land at higher values may have problems if the land values fall.