Important: The information on this website is for experienced investors. It is not a personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value: you could lose all the money you invest. Tax rules can change and benefits depend on circumstances.
More details on forestry investments
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How do forestry investments work?
The principle is simple: you invest in commercial forests for the long term. The trees – predominantly Sitka Spruce, a hardy fast-growing conifer well suited to Britain’s climate – sit on the hillside and grow. As they do, you should benefit from capital appreciation in the value of the trees and the land they are on, and from any income produced by harvesting the trees and selling the timber – the main part of a tree is used for construction or making paper and cardboard, while the offcuts, twigs and chippings are used for biomass.
Investment in forestry is a long-term commitment – possibly 10 years or more – and a forest is by its nature a very illiquid asset. But if you’re comfortable with that, it can have significant tax benefits (see below), and once established requires comparatively little upkeep. Meanwhile, it also performs a crucial role in carbon capture and helping to achieve UK environmental sustainability targets.
How have forestry investments performed?
UK forestry has a strong long-term performance track record. Based on the most recent data available to us, it was the best-performing UK asset class over a period of five, 10 and 25 years to December 2023, producing annualised returns of 17.9%, 15.8% and 12.4% respectively. Moreover, forestry is broadly uncorrelated to other main asset classes. Please remember, past performance is not a guide to the future.
UK forestry compared with other investment sectors: cumulative performance over 1, 5, 10 and 25 years
Discrete annual performance to 31 December of each year
| 2023 | 2022 | 2021 | 2020 | 2019 | |
|---|---|---|---|---|---|
| UK Forestry | 5.4% | 5.4% | 33.3% | 33.3% | 15.6% |
| IA UK Equity Income | 7.1% | -2.6% | 16.6% | -11.4% | 20.6% |
| IA UK All Companies | 7.3% | -9.5% | 15.5% | -6.8% | 23.1% |
| IA £ Corporate Bonds | 9.3% | -16.3% | -1.7% | 7.8% | 9.4% |
| IA Gilts | 3.6% | -24.1% | -4.7% | 8.7% | 6.9% |
| IA UK Direct Property | -0.4% | -7.3% | 7.1% | -4.1% | -0.8% |
Source: Gresham House, Morningstar, to 31 December 2023. Please remember, returns are not guaranteed and past performance is not a guide to the future. Returns for UK forestry have been calculated using the IPD forestry index from December 1995 to its discontinuation in December 2017. There is no suitable replacement index. Gresham House, as the leading forestry asset manager, has supplied return data for 2017 to 2022 based on its managed portfolios, valued once every 24 months. The forestry performance is shown gross of fees. The IA UK Direct Property sector does not have a 25-year track record. The IA sector peer group performance is shown net of underlying fund manager fees.
What are the main benefits of investing in forestry?
Investment in UK commercial forestry could have significant tax benefits:
- Inheritance tax: potential for IHT relief after two years due to Business Property Relief, provided you still hold the investment on death
- Income tax: there should be no liability to income tax on timber revenue
- Capital gains tax: there should be no CGT due on any gain made on the value of the timber. The underlying land is subject to CGT although most of the gain would be in the value of the timber
From 6 April 2026 100% IHT relief will be limited to the first £1 million of qualifying assets (including private companies and agricultural property), with the remainder eligible for 50% IHT relief (an effective IHT rate of 20%).
Please remember tax benefits depend on circumstances and tax rules can change.
What are the main risks of investing in forestry?
Remember: investing in forestry is high risk.
- Capital is at risk – you should not invest capital you may require over the medium to long term, or which you cannot afford to lose.
- Taxation risk – tax rules can change, and tax benefits depend on individual circumstances. Eligibility for BPR is assessed at the date of death.
- Market risk – investments in UK commercial forestry are largely dependent on the UK timber market. An economic slowdown or a drop in construction demand are likely to have an impact.
- Risk of disease and pests – most trees are Sitka Spruce which are insured against ‘wind blow’ and fire. However, it is not possible to insure the crop against disease.
- Low liquidity – this is a long-term investment and should not be considered as readily realisable.
Free factsheet: Investing in forestry
Why invest in forestry? What tax benefits are there? Download your free guide and find out more on:
- Forestry’s resilience as an asset class
- Its strong performance over time compared to other asset classes (not a guarantee of future performance)
- Tax breaks for investing in UK commercial forests
- Some of the main risks and benefits of investing in Forestry – and why not everyone is eligible to apply
How much can I invest in forestry?
Forestry funds tend to have relatively high investment minimums, starting at £50,000. There is no upper limit.
How do I invest?
Forestry investments are considered very high risk and illiquid. You can access the offer details and our full investment review only if you have self-certified as a High Net Worth or Sophisticated Investor. If you then decide to apply, the first part of your application includes a questionnaire about your investment knowledge and experience to qualify as an Elective Professional Client. You will only be able to proceed if you pass this.
What are the charges?
A forestry fund will typically have an initial charge and an annual management fee.
Providers may also apply dealing fees and other charges. Please read the provider documents for full details of the charges.
Can I sell my forestry investments?
Forestry is a very long-term and illiquid investment.
A fund will typically have a term, e.g. 10-15 years from the final closing date, although this can be extended.
To provide a degree of liquidity before the set termination dates, the manager may look to arrange share sales by matching sellers with buyers. A charge normally applies. For more details, please see the funds' offer documents.
Any withdrawals will no longer benefit from IHT relief.