Forestry investments: a valuable source of inheritance tax relief?

Institutional investors – such as pension funds, family offices and even the Church of England – have long favoured investing in forestry for the long-term capital growth potential and comparatively low-volatility returns.

So far, UK forestry has rewarded them with a robust long-term performance track record. Over the last 10 and 25 years, cumulative annualised performance has outperformed other major UK asset classes. Please remember, past performance is not a guide to the future (see investment sector comparison).

It is also broadly uncorrelated to the other main asset classes and has been resilient in previous downturns – as forestry specialist Anthony Crosbie Dawson explains (you can watch his interview with our Chief Investment Strategist, Susannah Streeter, below).

Meanwhile, private investors have increasingly caught on to the generous tax advantages.

Investments in commercial forests qualify for IHT relief. This could become more valuable from 2027, when unused pension funds are brought within the scope of IHT, potentially increasing IHT bills and bringing more families into the tax net.

Tax rules can change and benefits depend on circumstances.

With more of your assets potentially in the IHT crosshairs – and provided you’re comfortable with the risks and illiquidity of forestry investing – could forestry be an opportune investment?

This article is a broad summary of a complex topic. Investing in forestry is only for eligible investors who have sufficient knowledge and experience; it is long-term and illiquid.

Investing in forestry involves owning commercial forests – from mature, established forests to land planted for woodland creation. 

As the trees grow, you could benefit from capital appreciation in the value of both the trees and the land they are on – as well as income from selling the timber and carbon credits.

To acquire an established forest might set you back millions. Alternatively, for a much smaller outlay (from around £50k or £100k) you could invest in a forestry fund and get exposure to a portfolio of forests run by a professional manager.

It is a long-term commitment – possibly ten years or more – and a forest is by its nature a very illiquid asset. If you’re comfortable with that, it can have significant tax benefits and once established requires comparatively little upkeep. You should not invest capital you may require over the medium to long term, or which you cannot afford to lose.

Under current rules, investments in commercial forestry can qualify for Business Property Relief (BPR).

This means that after two years the investment could potentially be passed on tax efficiently if you still hold it on death.

Under current rules, you could pass on up to £2.5 million (£5 million per couple) of qualifying assets completely free from IHT. Any excess would be subject to a reduced rate of IHT (20% rather than the standard 40%).

To clarify, “eligible assets” includes any assets that qualify for either Business Property Relief (BPR) or Agricultural Property Relief (APR), so forestry investments, investments in certain private companies, etc. Tax rules can change and benefits depend on circumstances.

So, if you’re concerned that loved ones may face a large IHT bill, this could be a way to keep more of your wealth in the family.

Moreover, forestry could help add diversification to an existing portfolio of investments.

As noted above, UK forestry is broadly uncorrelated to the other main asset classes and has been resilient in previous downturns. It was the best-performing UK asset class over a period of 10 and 25 years (December 2025). Please bear in mind past performance is not a guide to the future – capital is at risk.