‘Land value’ is the monetary price of a vacant plot. This value does not include any buildings or structures on the plot.
It’s important to know your land value because land increases in more value than bricks and mortar.
In the UK, the government does not generate revenue by land tax. Instead, landlords and tenants pay council tax to help fund the local council.
Current land and property values do not reflect council tax rates. Instead, council tax rates are based on property values from 1 April 1991! And, so, poorer households can pay more council tax than richer households due to the shift of demographics in certain areas.
Contrarily, land and property values determine land tax rates. The higher value your land and property is, the more tax you’ll pay. Hence, the rich pay more tax than the poor.
How to calculate land value
Valuing land requires a mass valuation process. Similar properties in the same location are grouped together, as part of this process. For example, all the one bedroom apartments in Soho.
To represent this group, a single property is selected. A land valuer assesses this single property to determine whether the price has increased or decreased. This new value is used to calculate the new pricing for all properties in the same ‘group’.
New values are benchmarked against local and national standards; this ensures consistency and accuracy. Landowners can find their land value on their land tax notice.
What factors impact the value of land?
Historic sale prices of properties are the most important factor when calculating the cost of land. The higher the property prices, the more expensive the land becomes.
Other important factors that influence land values include: zoning and heritage issues; types of usage for the land; location; views; shape and size of the land.
Nearby developments and infrastructure also impacts the price of land. That’s why you could make a good profit from buying real estate in poorer areas that will gentrify.
So, should taxes be based on the value of land?
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