Woodland income and management costs

Income and management costs

Woodland management and restoration can be profitable. Economic advantage covers not just income, but adding value to the woodland as a property, tax advantages including Inheritance Tax, and potentially improved sport and amenity use.

Timber income

In most managed woodlands there may be a reasonable volume of timber lined up for annual operations and sales. Even in previously unmanaged woods, there may be a surprising marketable component. For example, it may be many decades since a coppice compartment was last cut, with stems large enough for milling. Other work such as installing new rides, overdue thinning, or improving genetic quality can result in butts being available for planking by mobile or local sawmills. This is likely to yield at least double the price paid per tonne compared with firewood, or much more, depending on species and quality.

Firewood income

Strong demand for hardwood firewood has been raising prices paid to woodland owners. In fact, firewood has become surprisingly profitable in the last two years. Under-managed woodland often has an accumulation of increasingly valuable firewood for the local market. This is therefore a good time to plan for woodland restoration, since firewood sales and grant funding will pay for the establishment of a new age class of trees.

Woodfuel

Low value produce from woodland will usually at least find a place in the woodfuel market. At current prices, the costs of felling, extraction and transport is likely to be covered. This provides a relatively new and important incentive for timely thinning of plantations and good woodland management.

Woodland grants

A positive funding structure to help with woodland management is available from the Forestry Commission. Grant is paid in recognition of the fact that we all benefit from well-managed woodlands, but acknowledges the need for encouragement. English Woodland Grant Scheme funding makes an important contribution to woodland economics. Applications for funding are tailored to meet the individual needs of specific woodlands.

Help from the Tax Department

There are tax advantages to managing woodland as a business.

Inheritance Tax

Once woodland is managed as a business, it is eligible for Commercial Property relief at 100%. However it is worth bearing in mind that to be eligible, two years must elapse following purchase.

Income Tax

The income and profits from timber sales in woodlands managed commercially are free from both Income and Corporation Tax.

Capital Gains Tax

The gain in value of timber as it grows is entirely free from tax. Only the increase in the value of land is assessed for CGT. For this however, indexation and taper relief are available.

Management costs

Woodland management is regulated by the Forestry Commission through a complex system of standards, grants and licences. The job of woodland management usually involves consultation, including with the Forestry Commission, inventory and planning, grant applications, contract or work establishment and monitoring, sales, and ensuring regeneration. Time spent on this work is greatest in the first year, while establishing plans and procedures for the following years.

Woodland-management.co.uk will provide staged budget forecasts as woodland data is collated. Following the initial visit and consultation, a rough assessment of profitability can be given for the first and subsequent years, accounting for management costs, sales, and grant funding. This will depend on how representative the sites are during the visit.

Small pieces of consultation work are established over the phone and charged at an hourly rate.