The decision by the Bank of England to put 0.5% on to interest rates, taking base rate to 5%, is a further blow to borrowers.
The move came in response to stubbornly high inflation in the UK. Just over one year ago, the base rate was under 1%. It is now at a 15-year high.
While we have got used to base rates below 1%, the older generation often point out that these rates hit nearly 15% in the late 1980s. However, the money involved in major purchases was so much less than what it is now. The average house price in NI at the time was around £30,000, compared with over £170,000 in 2023; while on the land market, prices rarely went past £2,000/acre.
We are now seeing land typically make £20,000/acre and more across much of NI. While logic would suggest that the hike in interest rates will cool the market, it rarely happens that prices actually come down.
Land prices
Of course, the price of land is generally being driven by people who make their money outside of farming and see land as a good way to pass on wealth, utilising agricultural property relief on inheritance tax.
While there is naturally a lot of frustration among farmers out-bid for land, any move to change those inheritance tax rules to potentially discourage this practice would come with a lot of danger for farming families. Therefore, those tax rules are probably best left alone.
Encouraging leasing
In recent years, there has also been a concerted lobby in NI to mimic the tax break in the Republic of Ireland that encourages long-term leasing of land. Landowners must lease their land for at least five years, and those who opt for 15 years or more can claim tax-free income of up to €40,000 annually from leased land.
The aim of the Irish scheme is to help young people forging a career in farming. However, this is probably best done in a different way. As an industry in NI, we don’t need to give an even greater incentive for business people to buy up land.
Read more
Exit scheme will ban farmers from leasing land to suckler or dairy farmers
Planning needed to minimise inheritance tax
The decision by the Bank of England to put 0.5% on to interest rates, taking base rate to 5%, is a further blow to borrowers.
The move came in response to stubbornly high inflation in the UK. Just over one year ago, the base rate was under 1%. It is now at a 15-year high.
While we have got used to base rates below 1%, the older generation often point out that these rates hit nearly 15% in the late 1980s. However, the money involved in major purchases was so much less than what it is now. The average house price in NI at the time was around £30,000, compared with over £170,000 in 2023; while on the land market, prices rarely went past £2,000/acre.
We are now seeing land typically make £20,000/acre and more across much of NI. While logic would suggest that the hike in interest rates will cool the market, it rarely happens that prices actually come down.
Land prices
Of course, the price of land is generally being driven by people who make their money outside of farming and see land as a good way to pass on wealth, utilising agricultural property relief on inheritance tax.
While there is naturally a lot of frustration among farmers out-bid for land, any move to change those inheritance tax rules to potentially discourage this practice would come with a lot of danger for farming families. Therefore, those tax rules are probably best left alone.
Encouraging leasing
In recent years, there has also been a concerted lobby in NI to mimic the tax break in the Republic of Ireland that encourages long-term leasing of land. Landowners must lease their land for at least five years, and those who opt for 15 years or more can claim tax-free income of up to €40,000 annually from leased land.
The aim of the Irish scheme is to help young people forging a career in farming. However, this is probably best done in a different way. As an industry in NI, we don’t need to give an even greater incentive for business people to buy up land.
Read more
Exit scheme will ban farmers from leasing land to suckler or dairy farmers
Planning needed to minimise inheritance tax
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