Woodland Investment and Inheritance Tax: What high-net-worth individuals need to know

Woodland ownership has long held appeal for those seeking to diversify their wealth into land and sustainable assets.

In 2024, approximately 74% of total woodland in the UK was privately owned and, in recent years, we have seen an increase in the number of high net worth individuals (HNWIs) considering woodland as part of their investment / estate planning strategies.

But what does this mean for Inheritance Tax (IHT)?

The position is not as straightforward as some might hope, as Jo Summers, Head of Private Wealth & Tax at Jurit LLP, explores.

Why invest in woodland?

For many investors, woodland provides:

• A tangible, long-term asset less volatile than equities.
• Alignment with sustainability and ESG objectives, particularly where carbon sequestration or biodiversity projects are possible.
• A diversified investment that complements property and financial portfolios.

However, unlike agricultural land, woodland does not automatically attract significant IHT reliefs – and this is where professional advice is essential.

The Inheritance Tax position

Jo Summers, Head of Private Wealth & Tax at law firm Jurit LLP, advises clients who now include woodland in their portfolios. She explains:

“There is no Inheritance Tax (IHT) exemption that specifically applies to amenity woodland. You can get relief from IHT for woodland that is part of agricultural land, but that wouldn’t apply here.”

Instead, two forms of relief may apply in certain circumstances:

1. Business Relief

Previously called Business Property Relief, this can reduce the taxable value of qualifying business assets by up to 100%. However, for woodland to qualify, there must be genuine commercial activity (for example, a managed timber business). Purely amenity woodland will not qualify.

2. Woodland Relief

This is a niche relief that only applies to the trees themselves, not the underlying land. Key points include:

• IHT on the value of the trees can be deferred until they are felled and sold.
• The woodland must have been owned for at least five years, or inherited/received as a gift.
• The relief now only applies to UK woodland (it previously covered the EU).
• A formal election is required, supported by valuations of both land and timber.

As Summers notes:

“In practice, most of the value tends to lie in the land rather than the trees, so the relief is often of limited benefit.”

A Worked Example

Consider an HNWI who owns woodland valued at £2 million, comprising:

• Land value: £1.8 million
• Timber value: £200,000

On death, the IHT position might look like this:

• The land value (£1.8m) will usually be fully chargeable to IHT at 40% = £720,000 tax due immediately.

It is worth noting here that, there is an option to pay the tax in 10 equal annual instalments, rather than immediately. However, once you take into account HMRC’s 8% interest on these instalments, it isn’t a cheap option.

• The timber (£200,000) may qualify for woodland relief. This means the IHT liability of £80,000 (40% of £200,000) is deferred until the trees are felled and sold, at which point the tax is paid.

Total immediate IHT bill: £720,000
Deferred IHT: £80,000

Unless the woodland is run commercially (and qualifies for Business Relief), this example shows that most of the IHT exposure sits with the land value – and the scope of woodland relief is limited.

Business Relief now only gives total relief for the first £1m, after which only 50% relief applies.

So, if the £2m woodland did qualify for Business Relief, half the value would be exempt from IHT and the other half would be taxed at 20%. This would make the total IHT due, £200,000.

Capital Gains Tax on Disposal

In addition to IHT, Capital Gains Tax (CGT) may arise if woodland is sold or otherwise disposed of (e.g. as a gift) during the owner’s lifetime.

The rules distinguish between the land and the timber:

• Land: Any increase in the land’s value since acquisition is subject to CGT on disposal (currently up to 24% for individuals).
• Timber: Gains from the sale of timber are generally treated as capital receipts rather than income, which can make them more favourable. Importantly, standing timber can often be sold separately from the land, giving flexibility in tax planning.

This distinction makes it vital to structure woodland transactions carefully, particularly where the woodland forms part of a wider estate or commercial operation.

Practical considerations when investing in woodland

For HNWIs considering woodland investment, the message is clear:

• Don’t assume IHT reliefs will eliminate liability – the land itself will usually remain fully chargeable.
• Commercial activity matters – structured correctly, woodland could qualify for Business Relief, but this requires evidence of genuine trading and the relief only exempts the first £1m now, with anything over that value being taxed at 20%.
• CGT must be factored in – both for lifetime disposals and for future planning.
• Plan early – to take advantage of woodland relief, ownership conditions must be satisfied and elections made at the appropriate time.

Woodland can be an attractive investment from a sustainability and diversification perspective, but it is not a shortcut to inheritance tax savings.

Reliefs are limited, technical, and often only defer tax rather than remove it altogether.

Add to this the need to plan for Capital Gains Tax on disposal, and it becomes clear that specialist advice is essential.

For HNWIs, the key is to view woodland ownership as part of a broader wealth and estate planning strategy – not a standalone tax solution. For expert advice to support your strategy, Jurit LLP can help.