Woodlands relief lets the person liable for inheritance tax on a death elect to leave the value of growing trees or underwood out of the estate, so that tax is paid only when the timber is later sold or given away. The woodland must be in the UK, must not be agricultural property, and the deceased must have owned it for five years unless they inherited it or were given it. The relief covers the trees, not the ground they stand on, and the deferred tax falls away entirely if the next owner dies still holding the woodland.

Why does woodlands relief exist?

Commercial timber can take several generations to mature. Without a special rule, the same crop of trees could be taxed on one death after another before it ever produced any income. HMRC’s Inheritance Tax Manual at IHTM04371 describes section 125 of the Inheritance Tax Act 1984 (IHTA 1984) as the answer to that problem: the tax on the trees is deferred until the timber is turned into money or passed on, and then charged by reference to the death on which it was deferred.

It is a deferral, not an exemption. That makes it different from business relief or agricultural relief, which reduce the value charged on death outright. The joint HMRC, Forestry Commission and Natural England guidance for woodland owners on GOV.UK says that commercial woodlands may qualify for business relief where they are run as a business, and that woodlands relief is the fallback where agricultural relief and business relief are not available.

Which woodlands qualify?

Section 125(1) and IHTM04373 set out the conditions. All of them must be met:

  • Location. The woodland must be in the United Kingdom. Woodland elsewhere in the European Economic Area qualified for deaths from 22 April 2009, but Finance (No. 2) Act 2024 restricted the relief to the UK again for deaths on or after 6 April 2024 (IHTM04377).
  • Not agricultural property. Woodland occupied with farmland and ancillary to it, such as shelter belts, game coverts and spinneys, is agricultural property and falls under agricultural property relief instead (IHTM24032). Amenity woodland and commercial timber plantations are not agricultural property.
  • Ownership. The deceased must have been beneficially entitled to the woodland throughout the five years before death, or have acquired it other than for money or money’s worth. A purchaser therefore needs five years of ownership; someone who inherited or was given the woodland needs no minimum period.
  • Part of the death estate. The relief only applies to value in the estate immediately before death. IHTM04374 includes the free estate, a severable share of joint property, settled property in which the deceased had a qualifying interest in possession, and gifts with reservation. It excludes lifetime transfers, including potentially exempt transfers that fail, and charges on relevant property trusts.
  • Direct ownership. HMRC says at IHTM04376 that a partner who owns a share of the partnership’s woodland can qualify, but a shareholder in a company that owns woodland cannot. Investors in woodland syndicates may get business relief instead (IHTM25251).

HMRC also says that if the deceased had already sold the standing trees to someone else before death, neither party gets the relief.

How is the election made?

Under section 125(2) and (3), the person liable for all or part of the tax elects by notice in writing to HMRC within two years of the death, or a longer period if HMRC allows. IHTM04375 adds that an election can be made for distinct, identifiable areas of timber rather than the whole estate, and that a request to withdraw an election within two years of death should normally be allowed.

The ground itself is still valued and taxed in the normal way. HMRC asks the Valuation Office Agency to value the ground without the trees, sometimes called the “prairie value”, and to confirm that it is not agricultural property (IHTM23208).

What triggers the deferred charge?

Section 126 charges tax when all or part of the trees or underwood are disposed of, whether with the ground or separately. Three points limit the charge:

  • a disposal to the owner’s spouse or civil partner is not a chargeable event (section 126(2));
  • once tax has been charged on particular trees, a later disposal of the same trees does not trigger a second charge by reference to the same death (section 126(3));
  • the charge only runs until another death on which the value transferred includes that ground. If there has been no disposal by then, the deferred charge is extinguished with no tax payable (IHTM04121).

On that later death the timber is taxed in the normal way as part of the new estate, unless a fresh election is made.

How much tax is due on a disposal?

Section 127 sets the amount charged. On a sale for full consideration it is the net proceeds of sale; on any other disposal, such as a gift, it is the net value of the trees at the time. Section 130(2) allows these expenses to be deducted, so far as they are not deductible for income tax:

  • the costs of disposing of the trees;
  • replanting costs incurred within three years of the disposal, or longer if HMRC allows, to replace the trees sold;
  • replanting costs to replace trees from an earlier disposal, to the extent not already allowed.

If the trees would have counted as relevant business property on the death, section 127(2) reduces the amount charged by 50%.

Section 128 sets the rate. The amount is added to the value transferred on the original death, together with any earlier amounts charged under section 126 for that death, and taxed as the highest part of it at the rates for that death. The reduced 36% charity rate in Schedule 1A is ignored for this purpose (section 128(2)). If the disposal is itself a chargeable transfer, for example a gift into a discretionary trust, section 129 reduces the value of that transfer by the woodlands tax charged.

Who pays, and by when?

Section 208 makes the person entitled to the sale proceeds liable, or the person who would be entitled if the disposal had been a sale. Section 226(4) makes the tax due six months after the end of the month in which the disposal happens, and section 216(7) requires an account within the same period. HMRC says at IHTM10840 that it does not usually insist on a formal account for these events, though taxpayers may use form IHT100f.

How might the numbers work?

Illustration only. Clare dies leaving an estate that, without the relief, would be well above her nil rate band, including a commercial conifer plantation she inherited from her father. Her executors elect within two years to leave the trees, valued at £200,000, out of the estate. Six years later her son sells the standing timber for £260,000, paying £10,000 in selling costs, and spends £30,000 replanting within three years. The amount charged is £260,000 less £40,000, which is £220,000. Because Clare’s estate was already above the nil rate band, the whole £220,000 is taxed at the standard 40% death rate, giving £88,000, due six months after the end of the month of sale. Had her son kept the woodland until his own death, the deferred charge would have disappeared.

What are the common mistakes?

  • Electing for woodlands relief where business relief would give a better result. The two should be compared before the two year deadline.
  • Electing for shelter belts and farm woodland that are really agricultural property.
  • Assuming the relief covers the ground. Only the trees and underwood are left out.
  • Forgetting that a later felling or sale creates a tax bill and a filing obligation six months after the end of the month of disposal.
  • Expecting a clearance certificate to cover the timber. HMRC excludes deferred timber from the certificate (IHTM40132); see IHT30 clearance certificates.

Related reliefs are covered on our pages on inheritance tax business relief, conditional exemption for heritage assets, which can also apply to ancient woodland, and the inheritance tax nil rate band.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.