To wonder why agricultural land is worth so much?

[MrsBennetsPoorNerves]

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

I keep hearing farmers say that farming is very unprofitable, that even huge farms worth several million pounds produce next to no income, and that farmers would be forced to sell land in order to pay the tax bill, thereby making the business unviable. Hence the opposition to inheritance tax.

But if that's the case, how is it that these farms are worth so much in the first place? Surely, if it's such an unprofitable business, you would expect the value of the farm to drop to reflect the fact that it's actually a very unattractive investment?

NB I'm not trying to score a political point here, I do really want to understand.

Do you mean retain their house but gift the land? It's a possible option depending on circs. Hopefully they would not die within 7 years of the gift.

But you’re banking on a neighbouring farmer firstly wanting more land, secondly being able to afford it. Not sure there’s a lot of demand for fields with no farmhouse or yard/outbuildings. Sometimes you might get lucky and next door want some more fields.

and with many farms access to fields would be via the drive of the farmhouse so you’d have to grant access up the drive as part of the sale which makes the house less attractive when selling in the future.

There’s quite high demand! Hence the prices! You can get new farm buildings and the new owner might not want the house. It’s standard to do this. Equipment gets moved when required from the larger landholding.

A discussion on Radio 4 this morning included the point that the average age of farmers is increasing because since the IHT concession was put in place, farmers no longer retire but continue to keep the farm in lieu of making pension provision. Another reason why it's increasingly difficult foe a young person to acquire a farm.

But if they've gifted the farm to their DC (and the whole point of the farmers' complaints is that they want to pass down to their families) would they be losing their livelihood? Would they not continue to take an income from it in the same way that their children have been taking an income rather than working for free?

Yes, I did. My brain said "gift" but my fingers wrote '"sell."

They definitely could gift the farm and retire. But: they need to plan for this and they don’t. Farms supporting several families struggle. Farmers need to think about retirement planning much earlier - like most business owners.

Yeah, sorry I meant gift (to DC) not sell.

Yep. Hence the suggestion, rejected by the gvt, that they should have a transition period whereby those over 80 have a delayed start to the new regime.

I have been pondering the same thing since the budget announcement. Here are my musings

A commodity has value if people want it.

People want things that they perceive are valuable.

So the circular argument scrutinised too deeply implies that nothing is really worth anything.

Different commodities prices rise and fall with demand vs supply. OPEC can make the price of petrol go up be restricting supply for example. Shares in companies go up in value when a lot of people want them - and a lot of people want them if the perceive the business will make a big profit.

When the economy is shakey and it's difficult to know which businesses will make a profit, a lot of investors turn to commodities which have a more stable value, such as gold.

Land is a commodity in this way. It can't rust away or get stolen. It can't evaporate with a stock market crash. Its value is not based on its potential agricultural yield - that's an additional benefit unrelated to the the land's value. Its value is intrinsic to itself in the same way as gold, it has value because people want it, and people want it because it has value.

Most farms are worth less than £2m and will be unaffected by the IHT. Most farming families with farms above that threshold will find ways to incorporate their farms to ensure that no significant amount of farming assets are included in a taxable estate, it will only happen when there's a tragic accident that takes a member of the family unexpectedly rather than them dying of old age having divested themselves of their asseys 7 years earlier. When that happens, and if the family have to sell £1m worth of farmland to pay an IHT bill, that land will still exist. It will not be lopped off from East Anglia and towed across the sea to another country, it will stay right where it is and can continue to be farmed, potentially rented back to the original farmers at a reasonable rent that reflects the actual agricultural yield and the (low) profit that can be made from it, or potentially by its new owners. I would suggest a reasonable ammendment to the proposed changes should be that any land which is sold from a farm to pay an IHT bill should have its title deeds amended with a restriction to say that the owner of the land is obliged to actually actively farm the land or is liable for a fine, to ensure that any such land stays productive. If such a restriction puts a downward pressure on the price of land and makes the land less valuable then that's a genuine benefit to real farmers, as it will reduce their exposure to IHT, and will only damage the "fake" farmers who bought the land as a tax dodge

He’s LOVED by farmers up and down the country.

OP you need to watch Clarkson’s Farm. You really really do.

Im no fan of Jeremy Clarkson but it is an education in how farming works and just how very very difficult it is to make any money. He comes across as a plonker for much of it to be honest. He’s a very very bad farmer but he keeps trying.

Watching Kaleb nearly cry at the end of last season’s farming was heart breaking. It makes you see what they’re up against. He’s a seasoned farmer and even he could barely bring in a profit.

While JC has been a lying idiot about IHT and I can’t stand his mysoginy, I have to applaud him for how he’s raised the plight of farmers and the difficulties they face. Even the farmers in France love him and want a similar figurehead.

Consider also that we only grown 50% of our food. We import the rest. Remember how Spain just experienced terrible floods?

A lof of poly tunnels were wiped out. This sort of thing will become more frequent. Cost is food will only go up.

We used to grow 75% of our food. What does that tell you about farming? It’s contracting. The government doesn’t give a shit about food security which I find really worrying.

I agree that elites shouldn’t own farms as a tax dodge but they all as far as I know work the farms. As others who own land above have said, you can’t leave land to do its own thing, even fields need managing. And it makes sense to employ tenant farmers.

The sad thing is that prime grade A1 farming land is continually being sold off for housing developments. You can never get that back. Once the concrete goes in, that’s it. No more food. Ever.

I feel the U.K.‘s future looks bleak. I’m not sure that 20% inheritance tax was the right thing to do. It’s a huge administrative burden now for farmers if you look into the small print of family succession planning. The likes of Dyson etc will just look for clever ways to dodge it further.

Local planning can already put 'agriculatural ties' onto properties, meaning those looking to get into farming without paying over the odds and needing to compete with speculative housing developers do already have options.

The issue is noone really knows where they stand with the sudden introduction of the new IHT laws. It's no secret, that farmers have had to diversify their business models to stay afloat so many have been running B&Bs, glamping etc. 'Farm estates also use Business Property Relief (BPR) to reduce their tax burden, which is now also subject to the million pound cap – and farming groups say when the value of business assets are added in, this would bring more people over the threshold to pay'. [source channel4.com].

And IHT brings in approx £7b.

its tiny.

A wealth tax is what we need. Fortunately that idea is gaining ground globally. Finally.

Land is a finate resource so it's value will always remain high ultimately

Labour have woefully misrepresented to the public the impact this will have. £1million in assets isn't very hard to achieve for a farm. The barns, land, animals and equipment stack up fairly quickly.

We farm around 100ha, fairly small by farming standards And will be affected. If we'll be affected so will most farms. Our income will not be able to pay for the IHT. I make more as a reasonably paid professional then 100ha dairy farm does.

@plopsofa is right about JC. He might be a vile misogynist but farmers love him for what he's done to show the realities of farming. At the end of season 1 when he said that his average wage for the ag work was something like 46p/hour.... that's the realities farmers face. Remember the working time directive doesn't cover ag workers

I say this as someone who has voted Labour and as a staunch anti tory. I can see the need for reform but this is not it. This will have huge long term repercussions for our food security.

It's because of the potential alternative uses such as property developments, renewable energy (wind and solar farms), etc., certainly not for it's value as farmland. That's why land that can't be used for building and unsuitable for wind/solar energy remains stubbornly cheap.

My MIL sold hers for close on £1million with no planning although did have some agricultural buildings on it which did make some difference. They had it for years and bought very cheaply. A really good investment for her.

Attacking farmers and taxing them off their land, will not make land any cheaper. It will entrench land ownership as something only the super wealthy or dodgy corporations will be able to afford.

The whole attack on farmers has nothing to do with tax, money or fairness, it's simply to stop independent farming in the UK. Other countries are trying to the same thing in different ways, the Netherlands for example with the nitrogen nonsense.

It is the same mindset as attacking landlords. Tax and regulation changes forcing small landlords out of the industry. If you think renting your flat from a small time buy to let investor is bad, wait until your landlord is Blackrock. Same for the farms. The land will be bought by Blackrock and others to fiddle the subsidies for solar panels, or windmills, or concreted over for housing.

None of you grasping jealous fools will ever see a sniff of that land, or any revenue from it, but your food will cost more, with less choice, and you'll be indirectly stuffing money in the pockets of people you should despise....but yeah, you hate Clarkson so fuck the farmers eh. Shortsighted idiots.

I cannot believe anyone can possibly be defending Jeremy Clarkson!

Get Monty Don to talk for farmers. The whole nation loves him.
Why Jeremy Clarkson?
But that is not the main topic. That is to keep farm land as farms and make the business sustainable.
I have read a bit more about it, and if you add the business relief to it, does it not mean no payment needed for estates below 4 million pounds?

Monty Don? 😳

Also, the nitrogen thing in the EU is to protect your beloved countryside of intensive farming, which releases too much nitrogen and phosphorous into water streams, severely affecting life in them. It also negatively affects underground water.This is against the farmers own interest. A sustainable balance between production and quality of land and water preservation is needed.
That is all. Change is always tough, but we need to look past today and into whether it will better our tomorrow.

Have you watched Clarkson’s Farm?

Evil and good can co-exist. We are not one dimensional beings.

He has done a lot for farmers. I dislike him very much for everything else but for this, regardless of his motivation he has doe something good.

Monty Don does flowers and dogs!

I agree! Not the right person!

Yes, I rather have Monty Don.

@MauveCrow
The whole attack on farmers has nothing to do with tax, money or fairness, it's simply to stop independent farming in the UK. Other countries are trying to the same thing in different ways, the Netherlands for example with the nitrogen nonsense.

I agree I think some of this is down to moving food production to poorer countries for NetZero and forcing people off the land so the housing targets and new towns can be implemented.

@MushMonster

I can't stand Monty Don personally and he knows fuck all about farming, I've heard him talk about it. I wanted to shout he should bend over more so we can hear him better, its too muffled through his trousers.

JC knows nothing about farming either but he has been employng the right people and has given farmers more media time than they ordinarily get thanks to his show. He might have bought the farm for tax purposes, he might have decided to make money from having a show where he is crap at farming, but my goodness he has sparked an interest in an industry that has become almost invisible in recent decades.

Whatever you think of JC, he has at least done some good in highlighting the plight of a lot of farmers in the UK.

https://www.countrylife.co.uk/property/property-talk-why-the-price-of-farmland-is-set-to-climb-again-in-2023-252126#:~:text=Farmland%20has%20long%20been%20seen,of%20pasture%20to%20record%20levels.