Tax
Why the way you're paid matters as much as how much
Renewable rental income is typically taxed every year as income — commonly at an effective rate of around 42-55%, depending on whether it's received personally, through a trust, or through a company.
A capital payment, by contrast, is typically taxed once, as a gain, commonly at a materially lower rate. That difference between annual and one-off taxation can compound significantly over the life of a long lease.
A simple illustration
Take a renewable asset generating £1m of annual rental income, capitalised at a multiple of around 15x annual rent. Taking that as capital today, after capital gains tax, might net a landowner in the region of £11.5m immediately. Keeping the income instead, after income tax, might net £450k-£580k a year — meaning it could take 20-25 years to receive the same amount after tax that capitalising would deliver today.
Figures are illustrative only, based on a hypothetical example, and depend heavily on individual circumstances. This is general information, not tax advice.