Tax incentives have been deployed before to motivate investment in forestry, and have resulted in perverse consequences. Perhaps now is the right moment to try again, this time to reward public good outcomes.

In this thinkpiece I propose a modern alternative: a Woodland Resilience Tax Credit (WRTC). It would function as a capped, outcome-based fiscal incentive designed to mobilise private capital for resilient woodland creation and active management promoting adaptation to environmental change.

An awkward history

Schedule D was a UK government policy which permitted commercial forestry expenditure to be offset against an investor’s other taxable income, while the eventual proceeds from timber sales went largely untaxed, making woodland an attractive tax shelter, particularly for high earners, until Chancellor of the Exchequer (Margaret Thatcher government) Nigel Lawson abolished it in 1988.

“First, forestry. I accept that the tax system should recognise the special characteristics of forestry, where there can be anything up to 100 years between the costs of planting and the income from selling the felled timber.

But the present system cannot be justified. It enables top rate taxpayers in particular to shelter other income from tax, by setting it against expenditure on forestry, while the proceeds from any eventual sale are almost tax free.

The time has come to bring it to an end. I propose to do so by the simple expedient of taking commercial woodlands out of the income tax system altogether. That is to say, as from today, and subject to transitional provisions, expenditure on commercial woodlands will no longer be allowed as a deduction for income tax and corporation tax. But, equally, receipts from the sale of trees or felled timber will no longer be liable to tax.”

Nigel Lawson, Chancellor of the Exchequer: Budget Statement, 15th March 1988

Nigel Lawson’s 1988 Budget brought Schedule D forestry relief to an abrupt end. It had made woodland particularly attractive to people paying the highest rates of tax. Wealthy investors (notably some well-known celebrities), were readily persuaded to buy and afforest land purely for its tax advantage. The main target for such investments was the Flow Country in Caithness and Sutherland. Extensive monocultures of conifers were planted on land now recognised as the world’s most extensive blanket bog and a UNESCO Word Heritage Site. Indeed, the origins and manner of such afforestation had very real and lasting effects on the reputation of forestry in the UK.

Nearly forty years later, Britain is again struggling to attract the investment and land-use change assumed by its tree-planting ambitions. The question is therefore worth reopening: should the tax system do more to encourage forestry investment? The answer should certainly not be a return to Schedule D. There may, however, be a case for testing its modern inverse: a fiscal incentive that rewards sustained action and demonstrable progress towards resilient woodland creation and management.

The case for a new fiscal lever

Woodland creation and resilient management present a genuine economic challenge. They involve high initial costs, long periods before financial returns, and substantial and increasing biological risks from pests, disease, fire, drought, deer and grey squirrels. Woodlands also provide ecosystem service benefits that owners currently cannot sell (except carbon storage): biodiversity, flood mitigation, landscape quality and national timber security.

Grants such as the England Woodland Creation Offer address part of this problem. Equivalent schemes operate in Scotland, Wales and Northern Ireland. But grant programmes can be administratively demanding, dependent on periodic public budgets, and better suited to funding defined projects than supporting continuous management over several decades. They have not, on their own, generated either the rate of woodland creation sought by government or the active management of much of the existing woodland resource.

A well-designed tax mechanism might attract long-term private capital, support investment across woodland portfolios and establish a rules-based entitlement available to anyone meeting approved conditions. If guaranteed over a sufficiently long period, it could offer greater predictability than a grant programme renewed through successive spending settlements, often prone to fickle government turnovers. It might also reach commercial owners and investors who would not apply for a conventional grant.

The argument against such an incentive is the one Lawson made. Relief calibrated to expenditure or the investor’s tax position, rather than to what a woodland delivers, rewards the lest motivated investors and the wrong outcomes. It favours those with the largest tax liabilities, can inflate land prices independently of productive value, and can weaken the relationship between ownership and stewardship when management is ruled by remote and disinterested investors.

These risks are far from hypothetical. In the Flow Country, tax relief interacted with planting grants, cheap land, national timber policy and weak environmental safeguards to attract externally financed conifer afforestation on a highly unsuitable scale. Essentially, wrong tree, wrong place, and wrong reason. Any credible modern incentive must therefore be designed to reward eligible action and verified progress towards defined woodland outcomes, not expenditure alone. Any credible modern incentive must therefore be designed to reward eligible action and verified progress towards defined woodland outcomes, not expenditure alone. In short, a modern tax incentive must reward right tree, right place, and right reason.

A modern tax incentive must reward right tree, right place, and right reason.

Gabriel Hemery

The UK is not devoid of forestry tax advantages

Please note: This section reflects the author’s understanding of current forestry taxation as a matter of public policy, not professional advice. Tax rules change and individual circumstances vary; anyone considering their own position should consult a qualified tax adviser.

It is important to be precise here, because any calls to ‘bring back a tax incentive’ can obscure how favourably forestry is already treated. In the UK, income from the commercial occupation of woodland is exempt from income and corporation tax. When commercial woodland is sold, the value attributable to growing timber is normally excluded from capital gains tax, although the underlying land remains chargeable.

The position for inheritance tax is more conditional. A genuinely commercial forestry business may qualify for Business Property Relief, while woodland occupied with qualifying agricultural property may fall within Agricultural Property Relief where its use is ancillary to agriculture. Neither treatment is automatic. Where those reliefs are unavailable, Woodlands Relief can defer inheritance tax on the value of trees and underwood until their subsequent disposal.

This area has recently been through considerable turbulence. The October 2024 Budget proposed limiting 100 per cent Agricultural Property Relief and Business Property Relief to £1 million of combined qualifying value per person from April 2026, with 50 per cent relief above that threshold. Following sustained opposition, the government raised the allowance to £2.5 million per person in December 2025 and made unused allowance transferable between spouses and civil partners. A couple may therefore pass on up to £5 million in qualifying agricultural and business assets before the reduced rate applies. When their two ordinary inheritance-tax nil-rate bands of £325,000 are also included, the combined tax-free figure can reach £5.65 million.

Government has therefore adjusted an important fiscal lever twice within eighteen months, primarily as part of wider inheritance-tax policy rather than in pursuit of any stated silvicultural objective. I admit that this exposes a weakness in the argument that tax policy is inherently more stable than grants. Clearly, stability would need to be deliberately built into any new tax scheme through a long-term settlement, rather than be assumed.

Why use tax rather than deploy another grant?

A refundable credit linked to an approved woodland management plan, conditional on activity, paid in stages, and subject to verification risks looking like a grant awkwardly administered through the tax system. If it simply reproduced existing appraisal, claim, and monitoring bureaucracy within HMRC, it would add complexity without solving the core problem. A tax credit is only justified if it offers something materially different: by leveraging existing forestry body inspections for site verification while utilising HMRC purely as an automated execution mechanism, it can bypass grant budget bottlenecks without forcing tax authorities to become ecological assessors.

HMRC does not inherently possess ecological or silvicultural expertise. The verification/approval should therefore remain with national forestry authorities (e.g., Forestry Commission, Scottish Forestry) while HMRC handles the fiscal credit payout will alleviate administrative skepticism.

A tax credit would only be justified if it offered something materially different. Its potential advantages would be that it:

• creates an entitlement under published rules, rather than requiring applicants to compete for a limited funding pot;
• scales automatically with qualifying activity, within defined caps;
• integrates with the normal accounts and investment decisions of forestry businesses;
• supports programmes of activity across multiple woodlands rather than treating every intervention as a separate project; and
• provides a predictable incentive for sustained management, not only capital support for initial establishment.

These are plausible advantages, but remain unproven. The administrative cost, distributional effects and additional woodland activity generated by a credit would need to be compared directly with an equivalent increase in grant funding. A pilot should test not simply whether a tax credit works, but whether it works better than spending the same public money through existing schemes.

Devolution: one tax system, four forestry systems

Forestry policy and grant delivery are devolved. Scotland, Wales and Northern Ireland operate their own schemes, while England has the England Woodland Creation Offer and its successor arrangements. Grant rates, eligibility and priorities differ meaningfully between the four nations.

The principal taxes affecting forestry investment are largely reserved to Westminster (i.e. UK-wide). Scotland and Wales have powers over aspects of personal income-tax rates, but corporation tax, capital gains tax, inheritance tax and the principal reliefs applying to forestry remain UK matters. A UK-wide credit would consequently sit above four different forestry-policy and grant systems. It would need an explicit coordination mechanism with each administration, rather than treating tax and grant policy as separable.

This could be a strength if a common fiscal framework supported different national priorities. It could equally become a source of distortion if one uniform incentive pulled landowners away from outcomes favoured by a particular national scheme. It would require a priority so central, and so critical, that any deviation would prove highly unlikely: a priority such as avoiding catastrophic ecosystem collapse.

Perverse incentives, old and new

Schedule D’s failure mode was capital entering forestry primarily for the tax benefit rather than for the quality of the resulting woodland. Today’s voluntary natural-capital markets are not a direct equivalent. The Woodland Carbon Code includes requirements for additionality, validation, verification, permanence and risk management that Schedule D lacked. Nevertheless, a related risk remains: the external financial value attached to carbon or biodiversity can become more influential than the ecological quality or productive potential of the woodland itself.

The controversy surrounding BrewDog’s Kinrara estate illustrates the reputational danger when promotional claims run ahead of delivery and verification. Having bought the 3,765 ha former sporting estate in 2020 for its “Lost Forest” rewilding project, the company admitted in 2024 that around half the saplings planted in its first year had died, despite Scottish Forestry having already paid out almost £700,000 in grant funding towards the scheme (The Scotsman, 2024). More broadly, demand from natural-capital investors may contribute to higher land values in some areas and can place financially motivated purchasers in competition with farmers, local owners and productive forestry businesses.

A new tax incentive would enter this already crowded landscape. That strengthens the case for caps, transparency and coordination with carbon and biodiversity income. It also argues against paying for an outcome more than once.

The Woodland Resilience Tax Credit (WRTC)

The strongest modern incentive would shift the emphasis from tax relief for spending money on trees to fiscal reward for undertaking and sustaining actions that build resilient woodland systems and public value.

A Woodland Resilience Tax Credit (WRTC) might have the following features:

• Available for woodland creation and improvement of existing woodland. Britain has a substantial under-managed woodland resource. Eligible activity could include inventories, management planning, woodland condition assessments, thinning, deer and grey-squirrel control, species diversification, infrastructure and ecological monitoring, as well as new planting.
• Tied to an approved, UKFS-compliant management or creation plan. The plan would define the relevant actions and intended outcomes, preventing relief from following expenditure without purpose.
• Refundable. Farmers, smaller owners, charities and community groups without substantial tax liabilities must be able to benefit; otherwise the scheme would reproduce Schedule D’s bias towards the wealthy.
• Staged against actions and milestones. An initial credit could support eligible investment, followed by payments for establishment, survival, browsing control, diversification, thinning or other verifiable progress. The scheme should not pretend that climate resilience itself can be conclusively demonstrated within a few years.
• Enhanced for defined public benefits. These might include species and structural diversity, riparian woodland, habitat connectivity, productive broadleaves and climate-adapted silviculture.
• Subject to safeguards and proportionate clawback. Ecological requirements, minimum management periods and transfer of obligations to successor owners would be more workable than attempting to recover money decades after every subsequent failure.
• Capped per beneficial owner or associated enterprise. This would reduce its attraction as an open-ended wealth-management device and prevent avoidance through fragmented holdings.
• Coordinated with grants and environmental markets. Combined funding should be transparent, with clear rules distinguishing complementary support from double payment for the same action or outcome.

This hybrid approach is more realistic than paying directly for ‘resilience’. It rewards actions known to increase adaptive capacity and releases later payments when observable milestones are achieved. Longer-term monitoring can then show whether woodland condition and resilience are improving over time.

Risks that good design might not eliminate

A staged credit would still carry significant risks:

• Deadweight. Some public money would support management that might have happened anyway.
• Distribution. Even a refundable credit may be easier to access for owners able to afford professional plans and advice.
• Verification costs. Assessing establishment and management milestones is more demanding than checking invoices (although state-of-art solutions including remote sensing will help).
• Policy fragmentation. Another scheme could add complexity alongside forestry grants, agricultural support, carbon finance and biodiversity markets.
• Long-term compliance. Woodland ownership can change several times before the consequences of today’s decisions become clear.
• Gaming and displacement. Investors might restructure ownership to remain below caps or divert activity towards what attracts credit rather than what a particular woodland most needs.

These are reasons to test and refine the idea, not necessarily to reject it. But the burden of proof should rest with the new instrument. It must demonstrate additional action, fair access and better value than an equivalent grant expenditure.

Potential landscape-scale piloting

A bounded landscape with an established delivery partnership would provide a better test than immediate national implementation. It would allow fiscal support to be considered alongside landowner behaviour, ecological monitoring and existing grants.

In England, the Western Forest, spanning Bristol, Wiltshire, Gloucestershire and Somerset, combines ambitious new planting with substantial existing and often under-managed woodland. Both creation and management elements of the credit could therefore be examined in one landscape.

In Wales, the National Forest for Wales provides a different model: a national network that includes newly created, managed and ancient woodland sites under a common framework.

In Scotland, Cairngorms Connect brings neighbouring land managers together across 60,000 hectares of native woodland, plantation, peatland and montane habitats under a long-term restoration programme.

These are illustrative possibilities. Northern Ireland should also be represented if the intention is ultimately to create a UK-wide mechanism. A coordinated set of national pilots could test how a common tax framework interacts with different grant regimes and forestry priorities more effectively than a single England-only pilot.

Where this leaves reluctant landowners

A tax credit will not persuade every reluctant landowner to plant or manage woodland. Decisions are also constrained by risk, confidence, knowledge, regulation and the unusually long horizons of forestry. Instead, its credible purpose is narrower: to make sustained private investment in woodland creation and active management more attractive, while directing that investment towards outcomes society and the environment actually needs.

Grants often pay in arrears after heavy initial capital outlay. A tax credit system could offer a structural cash-flow advantage (e.g., offset against quarterly corporate/personal tax obligations), which is often a bigger driver for private landowners than total funding amounts.

Britain should definitely not bring back Schedule D. But there is a case for testing its modern inverse: a capped, inclusive and carefully verified fiscal incentive that rewards action and continuing progress towards woodland resilience. The test should be exacting. It must mobilise investment that would not otherwise occur, improve woodland practice aimed at increasing adaptive capacity, work coherently with devolved policy and deliver better value than directing the same money through grants.

References and further reading

• Forestry Commission, ‘Woodland Carbon Code’, Forest Research, forestresearch.gov.uk
• HM Revenue & Customs, ‘Agricultural property relief and business property relief changes’, updated 3 March 2026, gov.uk
• HM Revenue & Customs, ‘Inheritance Tax Manual: Woodlands’, gov.uk
• Lawson, N., Budget Statement, 15 March 1988, Hansard, parliament.uk
• Forestry Commission, ‘Taxation of woodlands’, Forestry Commission Bulletin 87, 1989, forestresearch.gov.uk
• Warren, C.R., ‘Birds, Bogs and Forestry revisited: the significance of the Flow Country controversy’, Scottish Geographical Journal, 116(4), 2000, pp. 315–337, tandfonline.com
• Welsh Government, ‘National Forest for Wales grows to over 90,000 hectares’, November 2025, gov.wales
• Cairngorms Connect, ‘The partnership’, cairngormsconnect.org.uk

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Appendix I: An Illustrative Tax Information and Impact Note

The following is a mock policy proposal. It renders the Woodland Resilience Tax Credit set out above in the format HM Treasury and HMRC use to accompany a new tax measure at a Budget or Finance Bill, a Tax Information and Impact Note (TIIN). Figures, dates and contact details are placeholders; the legislative references to existing law are accurate as of writing.

Woodland Resilience Tax Credit

Who is likely to be affected

Individuals, partnerships, trusts and companies carrying on a forestry business in the United Kingdom, including farmers diversifying into woodland management, landed estates, community woodland groups and charities.

General description of the measure

This measure introduces a refundable Woodland Resilience Tax Credit (WRTC) for expenditure incurred on the creation and management of woodland in accordance with an approved woodland plan. The credit is payable in stages, linked to defined milestones, and is available regardless of whether the claimant has sufficient tax liability to absorb it as a deduction.

Policy objective

The measure supports the government’s ambition to increase woodland creation and improve the management of existing woodland, in line with the England Trees Action Plan and equivalent commitments by the devolved administrations. It is designed to mobilise private investment in forestry outcomes that are difficult to achieve through grant funding alone, while avoiding the distributional and land-market distortions associated with expenditure-based forestry tax relief prior to 1988.

Background to the measure

Forestry expenditure was relieved against general income under Schedule D until its abolition in the 1988 Budget. Since 1988, commercial woodland has been outside the scope of income tax and corporation tax on both expenditure and receipts. This measure does not reinstate expenditure-based relief. It creates a new, standalone credit conditional on verified activity and outcomes, sitting alongside the existing income tax, corporation tax, capital gains tax and inheritance tax treatment of woodland, which is unaffected by this measure.

Detailed proposal

Operative date

The measure will have effect for qualifying expenditure incurred on or after [date], subject to transitional provisions for schemes already in receipt of grant funding under the England Woodland Creation Offer or equivalent devolved schemes.

Current law

There is no current tax credit for forestry expenditure. Relief for forestry is presently confined to the exclusion of commercial woodland income from income tax and corporation tax (Income Tax (Trading and Other Income) Act 2005, s. 11; Corporation Tax Act 2009, s. 37), the exemption of growing timber from capital gains tax (Taxation of Chargeable Gains Act 1992, s. 250), and inheritance tax reliefs under ss. 115–124C and ss. 125–130 of the Inheritance Tax Act 1984.

Proposed revisions

Legislation will be introduced in Finance Bill [year] to provide that a person carrying on a forestry business may claim the WRTC where:

(a) the qualifying land is the subject of an approved management or creation plan certified as compliant with the UK Forestry Standard;

(b) the claimant has incurred qualifying expenditure on eligible activities, as set out in regulations; and

(c) the claim is supported by evidence of the relevant milestone having been met, as verified by the Forestry Commission, Scottish Forestry, Natural Resources Wales or the Forest Service, as applicable.

The credit will be capped at £[x] per beneficial owner or connected group of enterprises in any [ten]-year period, and will be subject to clawback where a minimum management period is not observed.

Summary of impacts

Exchequer impact (£m)

2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031	2031 to 2032
—	—	—	—	—

This measure’s cost would follow the standard Budget scorecard process and is not estimated here.

Economic impact

This measure is expected to increase the rate of woodland creation and the level of active management of existing woodland, with consequent benefits for carbon sequestration, flood mitigation and biodiversity. It is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure mainly affects individuals and businesses engaged in forestry. It is not expected to impact on family formation, stability or breakdown.

Equalities impacts

The refundable design is intended to widen access to owners and community groups without substantial tax liabilities, who would otherwise be unable to benefit from an equivalent expenditure-based deduction.

Impact on business including civil society organisations

This measure is expected to have a positive impact on forestry businesses and community woodland organisations. One-off costs will include familiarisation with the new rules and the preparation of an approved management plan where one is not already in place. Continuing costs will include the preparation of evidence for staged claims.

Operational impact (£m) (HMRC or other)

HMRC will administer the fiscal payouts and offsets using its automated systems. Verification of milestones will be integrated into existing inspection regimes operated by national forestry authorities (Forestry Commission, Scottish Forestry, Natural Resources Wales, Forest Service), minimizing redundant administrative build-out within HMRC.

Other impacts

A pilot phase is proposed, targeted at one or more bounded landscapes with an existing delivery partnership, before wider rollout, to test administrative feasibility and value for money against equivalent grant expenditure.

Monitoring and evaluation

The measure would be monitored through information collected on claims, supplemented by a post-implementation review three years after introduction, drawing on National Resilience Reporting data on woodland condition where available.

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Appendix II: EXECUTIVE BRIEFING MEMORANDUM

TO: Ministers, HM Treasury; Policy Leads, DEFRA (England), Cabinet Secretary for Rural Affairs, Land Reform and Islands (Scottish Government), Cabinet Secretary for Climate Change and Rural Affairs (Welsh Government), and Department of Agriculture, Environment and Rural Affairs (DAERA, Northern Ireland)

FROM: Dr Gabriel Hemery, Chartered Forester, Chartered Environmentalist

DATE: 1 October 2026

SUBJECT: Policy Proposal: Woodland Resilience Tax Credit (WRTC)

Executive Summary

The UK faces a critical gap between its statutory tree canopy targets (16.5% cover by 2050) and the current pace of private capital deployment. Grant programs like the England Woodland Creation Offer (EWCO) are essential but constrained by departmental expenditure limits (DEL), short spending review cycles, and high administrative friction. Conversely, historical tax incentives—notably pre-1988 Schedule D relief—generated severe environmental damage (e.g., the Flow Country) by rewarding expenditure over outcomes.

This briefing proposes a modern alternative: a Woodland Resilience Tax Credit (WRTC). By operating as a rules-based, refundable tax credit conditional on verified ecological milestones, the WRTC leverages private investment to build climate-resilient woodland systems without creating a tax shelter or adding administrative burden to HMRC.

The Problem: Why Current Mechanisms Fall Short

1. Grant System Limitations: Grants operate on annual public budget cycles, creating uncertainty for multi-decade forestry investments. They focus heavily on initial planting rather than long-term active management (e.g., thinning, browsing control, biosecurity).
2. Under-Managed Existing Resource: Over 40% of UK broadleaf woodlands remain under-managed or unmanaged, diminishing carbon stability, biodiversity, and domestic timber security.
3. The 1988 Legacy Risk: Pre-1988 Schedule D relief allowed top-rate taxpayers to write off forestry expenditure against non-forestry income, leading to “wrong tree, wrong place, wrong reason” monocultures. Any new fiscal lever must avoid repeating this expenditure-based failure mode.

Key Mechanism: The Woodland Resilience Tax Credit (WRTC)

The WRTC is a standalone, outcome-based fiscal credit introduced in the Finance Bill. It sits alongside existing forestry tax exemptions (Income/Corporation Tax exemptions under ITTOIA 2005 s.11 / CTA 2009 s.37; CGT timber exemption under TCGA 1992 s.250) without reinstating general expenditure deductions.

FORESTRY BODIES	HM TREASURY / HMRC
Forestry Commission / Devolveds	Automated Execution
Certifies UKFS Management Plan	Receives digital token
Inspects site milestones (e.g., Year 3 survival, browsing control)	Applies tax credit offset or issues refundable payout

Core Structural Features

• Separation of Powers: Verification remains strictly with national forestry authorities (Forestry Commission, Scottish Forestry, Natural Resources Wales, Forest Service). HMRC acts purely as a financial execution engine, processing credits against certified digital tokens.
• Refundable Design: Accessible to tenant farmers, community woodland groups, and smaller landowners without major tax liabilities, preventing Schedule D’s bias toward high earners.
• Staged & Milestone-Based: Disbursed in tranches tied to verifiable resilience metrics (e.g., UKFS compliance, establishment survival rates, species diversification, active thinning, deer/squirrel control).
• Capped & Anti-Avoidance: Hard caps per beneficial owner/enterprise prevent open-ended wealth-sheltering, accompanied by clawback mechanisms for non-compliance.

Strategic Advantages for Treasury & Devolved Nation’s forestry departments

Priority Area	Grant System (Status Quo)	Proposed WRTC Mechanism
Budget Predictability	Subject to spending review cliffs & freezes.	Long-term statutory entitlement under published rules.
Market Coverage	Targets project-by-project applicants.	Reaches commercial portfolios, estates, & institutional capital.
HMRC Operational Cost	N/A	Low. Zero ecological assessment required by tax inspectors.
Long-Term Management	Capital-heavy at initial establishment.	Supports continuous multi-decade management milestones.

Implementation Roadmap: Landscape Piloting

Rather than immediate national rollout, a 3-year bounded landscape pilot is recommended to test landowner uptake, verification costs, and interaction with devolved grant systems.

• Candidate Landscapes: Western Forest (England), National Forest for Wales, or Cairngorms Connect (Scotland).
• Evaluation Metric: Demonstrating that the WRTC delivers additional managed hectares and private capital leverage compared to equivalent grant outlay alone.

Next Steps & Action Requested

1. Joint Working Group: Establish a joint HMT–forestry policy teams to refine technical design parameters (credit rates, caps, and milestone criteria).
2. Drafting: Incorporate formal Tax Information and Impact Note (TIIN) provisions ahead of the next Budget cycle.