Uncertainty and IHT tighten Scotland’s farm letting market

Scotland’s agricultural letting sector is contracting further amid rising uncertainty, shorter leases and looming tax changes, according to the Central Association of Agricultural Valuers (CAAV).

The CAAV said long‑running pressures in the Scottish landlord-tenant system were being sharpened by the UK government’s October 2024 Budget decision to reduce agricultural and business property reliefs from inheritance tax (IHT).

This combination appears to be driving more cautious behaviour, with shorter lets and reduced activity, according to its Scottish agricultural land occupation survey 2025, which highlighted that the net area of let land fell by a further 4,230ha in 2025.

See also: Where now for the tenanted farm sector?

CAAV secretary Jeremy Moody said: “While this is a larger loss than in 2024, it remains well below the steep contractions seen more than a decade ago.

“In some cases, owners whose tenancies have ended are holding off decisions about future use rather than definitively withdrawing land, suggesting the headline figure may exaggerate any shift away from letting.”

Attrition drivers

A key driver of attrition, Mr Moody said, was the relinquishment of secure 1991 Act tenancies.

“These losses have not been offset by new lettings under 2003 Act arrangements and, unlike England, Scotland has not seen newer tenancy types replace older agreements,” he said.

“As a result, the overall let area continues to shrink, and the survey also points to more cautious re‑letting.”

Of the holdings that became vacant, 60% were re‑let – at the lower end of recent ranges.

By area, 76% of land that fell vacant was re‑let.

Limited new land

However, new land entering the sector remains limited, with 1,750ha let for the first time in 2025, higher than in recent years but still insufficient to avoid a net loss.

The average size of a new tenancy fell to 55ha and the average lease length dropped to 3.35 years, below the maximum five‑year term for Short Limited Duration Tenancies (SLDTs) –  a key market uncertainty.

With an increased reluctance to commit long term, most of the new lettings were SDLTs, mostly for less than their five-year maximum term and used for interim management. Only a minority were Modern Limited Duration Tenancies (MLDTs), and then mostly for the minimum 10-year term.

The survey also highlighted that bare land again dominates the market.

80% of new lettings in 2025 were for land only; just 5% included a dwelling and only 17% of surveyed holdings with a house were re-let.

“The burdens of housing are a problem for both landlords and progressing farmers,” said Mr Moody.

New entrants

With a greater shortage of opportunities, new entrants also remain squeezed, with only two lettings (3% of all deals and 15% of those involving a change of farmer) going to new entrants, below the longer term norm of 20-30%.

Where land was let to new entrants, terms were longer – averaging 12.5 years on 99ha – but overall opportunities are dwindling.

“With tax reform adding to uncertainty and few signs of renewed confidence, Scotland’s let sector is likely to keep contracting unless the supply of new and re‑let land improves,” said Mr Moody.