Head of land and farm sales at GSC Grays, John Coleman, believes a combination of debt reduction and inheritance tax concerns has already seen a significant amount of land come to the market in 2024.

With the government signalling their intention to address the tax reliefs that make land acquisition attractive to non-farming owners, John believes we could see a change in the land market.

John explained: “The price of land has consistently risen year after year for the last decade. However, in recent months the value and demand for some farms and blocks of land has slowed due to a number of factors including the withdrawal of the Basic Payment Scheme (BPS), price volatility, interest rates, and the weather, which have all had a huge impact on profits. The 100% increase in land we have brought to market compared to 2023 mostly involves small parcels of land - ranging from 10 acres up to 200 acres – as many farms look for ways to restructure their businesses or reduce debt as they adjust to the reduced income.

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“Good sized productive commercial units and good quality land remain in demand. But for more marginal land, or less commercial units, that do not attract interest from natural capital buyers, things are slowing down, with more scrutiny on whether the unit can generate enough income to cover loan repayments.”

He added, “Conversely, where land and farms offer an opportunity to develop ecosystem-services, there is growing demand from non-governmental organisations and investment funds. Whilst this market is still in its infancy it is showing signs of gaining momentum.”

The next UK budget on October 30 could potentially affect Agricultural Property Relief (APR) and Business Property Relief (BPR) as part of a wider reform of inheritance tax, alongside changes to capital gains tax rates and reliefs. In recent years, APR and BPR have allowed farm owners to pass farms to the next generation without heavy tax burdens and whilst John hopes these reliefs will not be removed, he suspects qualifying for them will become tougher.

John explained: “Capital taxes impact farms and farmland with inheritance tax the most influential. We’ve anticipated changes for years, and it seems likely now. Active farming and business management are expected to be key criteria, meaning those who bought farms for inheritance tax reasons may need to reassess how they run them. The biggest impact might be on the tenanted sector, especially for post-1995 agricultural agreements. If APR is lost or amended, it could discourage landowners from offering land to the tenanted market.

John concluded: “As the land market continues to evolve, we’re seeing a shift in priorities. Debt reduction, taxation concerns and changes in agricultural policies are all influencing decisions. However, with the rise of natural capital and growing interest in environmental credits, there are new opportunities for landowners to adapt and thrive in this changing landscape.”