Investors can grow healthy returns from woodland and forestry funds – but they must be wary of the costs.
Forestry investments have enjoyed strong returns averaging 8 per cent a year over the past two decades, according to figures from the UK Forestry Index compiled by analyst IPD.
But the biggest attraction for many is that woodland investments escape inheritance tax if purchased at least two years before the death of the buyer.
Income from harvesting commercial woodland is also free from income tax, though not income from other uses, such as renting it out for sporting activities. There is also no capital gains tax on growth in the value of any trees on your land, though the plots on which they grow are taxable.
Stephen Daniels, head of tax at investment adviser Time Investments in central London, says: ‘Historically woodland has had limited volatility – trees keep on growing no matter what happens to the economy. But the big appeal is the inheritance tax break.’