Inheritance Tax Planning and Woodlands - seeing the wood for the trees!

Can you help the environment and save some tax?  Emma Elwess considers inheritance tax planning and woodlands.

Brief inheritance tax position

Inheritance tax can be complex but the rate of tax is 40%, above the ‘nil rate band’ on which there is no inheritance tax to pay – this band depends on the individual’s family circumstances and assets. 

Why woodlands?

Investing in woodland, or reviewing what you do with your existing woodland, can be a useful estate planning strategy – leaving more for you to pass to the next generation.

Is it a business?

Woodland may qualify for Business Property Relief if commercially owned and managed as a business.

Examples of businesses that could qualify include woodland used for camping, fishing, or where the timber is being generated for sale – even if a sale may be years away.

Is it agriculture?

Woodland may qualify for Agricultural Property Relief at 100%, but just having woodland on your farm doesn’t mean it automatically qualifies.  Woodland has to be occupied in a way that is ancillary to farming, such as being used to provide farm timber or a shelterbelt.

What if my woodland isn’t a business or agriculture?

There is a limited ‘Woodlands relief’ but it is much less generous than the other reliefs.  It doesn’t apply to lifetime gifts (only on death), it only applies to the value of timber (not the land!) and is a deferral of tax rather than an exemption: worth considering, but not always useful.

What next?

Investing in woodland has great potential – but expert advice should always be taken on your individual circumstances.  To discuss estate planning, contact Emma Elwess at Pearsons & Ward on 01653 692247, or visit our stand at Ryedale Show on 26^th July.