ICAEW.com works better with JavaScript enabled.


Expanded guidance on taxation of woodlands


Published: 20 Dec 2023 Update History

HMRC has reviewed and expanded its tax guidance for owners of woodlands. Owners may qualify for certain tax reliefs or exemptions from certain taxes, depending on the type and use of the woodlands.

The updated online guidance features new sections addressing the tax treatment of different types of woodland, including commercial woodlands, amenity woodlands and ancient woodlands.

Inheritance tax (IHT) reliefs are available for certain types of woodland. For instance, commercial woodlands where timber is grown for felling in the future may qualify for woodlands relief. Recognising that growing trees may take several generations to mature, woodlands relief is designed to prevent an IHT charge arising on each successive death. Woodlands relief applies to the value of the trees or underwood, but not the land on which they grow. It allows the IHT to be deferred until the trees are disposed of – for example, by sale or gift.

Other types of woodland that are used as part of a business or ancillary to agricultural activities may instead attract business property relief or agricultural property relief (APR).

Ancient woodlands that are sites of special historic, scenic, or scientific significance may qualify for the conditional exemption tax incentive scheme. This exempts them from capital gains tax and IHT if certain conditions are met.

From 6 April 2024, woodlands relief and APR will be available for property located in the UK only.

Different types of woodlands may also attract special treatment for income tax and corporation tax purposes. The type of woodland may affect an owner’s eligibility for the basic payment scheme. 

Land used to generate carbon or other ecosystem service units may also be outside the scope of income tax and corporation tax. As the application of the tax rules to this developing area is evolving, both HMRC and other guidance is thin on the ground. The updated guidance highlights the guidance that exists currently. However, taxpayers may need to take specialist advice. 

HMRC recently held a consultation on the Taxation of environmental land management and ecosystem service markets, with a response expected in early 2024. Read ICAEW’s representation. 

The Tax Faculty

ICAEW's Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

More support on tax

ICAEW's Tax Faculty provides technical guidance and practical support on tax practice and policy. You can sign up to the Tax Faculty's free enewsletter (TAXwire) which provides weekly updates on developments in tax.

Sign up for TAXwireJoin the Tax Faculty

More from the Tax Faculty

Latest news
Making tax digital image

Stay up to date with the latest developments in tax by signing up to the Tax Faculty's weekly e-newsletter

Practical guidance

Comprehensive support for Tax practitioners each month from the Tax Faculty and expert contributors.

Technical support
Tax Faculty image

Expert advice from the Tax Faculty's technical managers on all the developments in tax policy and practice.

Open AddCPD icon

Add Verified CPD Activity

Introducing AddCPD, a new way to record your CPD activities!

Log in to start using the AddCPD tool. Available only to ICAEW members.

Add this page to your CPD activity

Step 1 of 3
Download recorded
Download not recorded

Please download the related document if you wish to add this activity to your record

What time are you claiming for this activity?
Mandatory fields

Add this page to your CPD activity

Step 2 of 3
Mandatory field

Add activity to my record

Step 3 of 3
Mandatory field

Activity added

An error has occurred
Please try again

If the problem persists please contact our helpline on +44 (0)1908 248 250