The Changing Inheritance Tax Landscape for Woodland Owners

Published byEilidh Campbell

10th December 2025

Forestry has long been recognised as a tax-efficient investment, particularly in the context of inheritance tax (IHT).

Commercial woodlands in particular have historically benefitted from generous reliefs. However, from April 2026, significant changes to IHT rules will impact how these assets are treated.

While a lot of media attention has focused on how the upcoming changes will affect farmers, woodland and forest owners should also take note as the new regime will have direct consequences for estate planning.

The Current Position
IHT is currently charged at a rate of 40% on the value of assets owned by a deceased individual, subject to any available exemptions or reliefs.

Under the existing rules, commercial woodland - including the value of both the land and trees - can qualify for 100% Business Property Relief (BPR), provided the asset has been owned by the deceased for at least two years prior to their death. This effectively means that commercial woodlands which qualify for BPR can be passed on free of IHT.

To be considered “commercial”, woodland must be managed with a view to profit. Supporting evidence to show that this is the case can include:
• a woodland management plan;
• records of management work carried out for example tree planting, fence maintenance, deer management;
• annual budgets and accounts; or
• a dedicated bank account for business related to the woodland.

By contrast, amenity woodlands, Christmas tree crops, and short rotation coppice are generally not considered commercial for IHT purposes, although they may qualify for other reliefs.

However, these rules are set to change in April 2026.

Changes from April 2026
From April 2026 significant reforms will take affect which affect the IHT treatment of business assets, including commercial woodland. The changes of most import for woodland owners are those affecting Business Property Relief (BPR) and Agricultural Property Relief (APR).

The first £1 million of business property in an individual’s estate will still attract the full 100% Business Property Relief from IHT. Any value above £1 million will only attract 50% relief. In practice, this means that individuals will be able to pass on up to £1 million in business assets tax-free, after which an effective IHT rate of 20% will apply to the remaining value.

For woodlands managed as part of a larger agricultural business the situation becomes more complex and professional advice from a tax specialist or accountant is highly recommended.

Worked Example
To illustrate the impact of the new rules, if the owner of a commercial woodland with a total value of £2 million were to die after April 2026 the woodland would be taxed as follows:
• First £1 million - fully exempt
• Remaining £1 million - 50% relief applies
• 40% IHT on £500,000 = £200,000 payable

By contrast, if the same commercial woodland owner were to die before April 2026, 100% BPR would apply and no IHT would be payable on the value of the woodland.

Carbon credits, short rotation coppice and Christmas tree crops are treated differently to commercial woodland, and tailored advice should be sought to evaluate how IHT will apply to those assets.

Other Reliefs for Woodland Owners

Agricultural Property Relief (APR)
APR does not apply to land used for the production of commercial timber but may be relevant to some non-commercial, agroforestry schemes or amenity woodlands. It is important to distinguish between land used for agriculture and land used primarily for timber production when considering relief eligibility.

Woodlands Relief
Where neither BPR nor APR is available, Woodlands Relief may be an option. This applies where trees are not yet mature at the time of death.
If eligible, Woodlands Relief allows you to defer IHT on the value of the timber or underwood (but not the land) until such time as the trees are felled and the timber sold or otherwise disposed of. If the sale is for market value then tax is chargeable on the net proceeds of the sale. If the timber is disposed of for less than market value then tax will be chargeable on the net value at the time of disposal.

Heritage Relief
Woodlands of outstanding scenic, historic, or scientific interest may qualify for Heritage Relief. This typically applies to ancient semi-natural woodlands listed by Natural England or Scottish Natural Heritage.
Where the woodland qualifies for Heritage Relief it may be exempted from IHT on the condition that the owner grant undertakings to HMRC to maintain the woodland and provide public access to it. If the undertaking are subsequently breached HMRC can recover costs from the deceased’s estate. It is possible for woodland to be designated as eligible for Heritage Relief prior to the owner’s death in order to provide certainty on the IHT position in advance.

Next Steps for Woodland Owners
Inheritance tax treatment for forestry and woodland assets is evolving. With the possibility of further updates being made in the Autumn Budget, it is crucial that landowners review their estate planning strategies now.
Anyone concerned about how the upcoming changes may affect their woodland or forestry assets should seek specialist legal and tax advice to ensure they make full use of any available reliefs.

This article first appeared in the Forestry Journal