A landowner's guide to biodiversity net gain

Changes are coming, biodiversity net gain is becoming mandatory from January 2024. To help understand how the changes will impact you, we've answered some of the most commonly asked questions in this guide. 

Biodiversity net gain (BNG) is a way of creating and improving natural habitats. BNG makes sure development has a measurably positive impact (net gain) on biodiversity, compared to what was there before development.

In England, from January 2024 developers must deliver a biodiversity net gain of at least 10%, however some local authorities are requiring more than that.

Biodiversity is measured in standardised biodiversity units. A habitat will contain a number of biodiversity units, depending on things like its: 

  • Size
  • Quality
  • Location
  • Land type

Biodiversity units can be lost through development or generated through work to create and enhance habitats. There is an official statutory biodiversity metric for calculating units.

If the developer cannot achieve the 10% gain in biodiversity by creating and enhancing on-site habitats, they must buy off-site units. There is a real opportunity for landowners to supply those units, selling on the BNG market is a choice for landowners and is a potential source of additional revenue.

To set a price for your units, you should think about the cost of, for example:

    • Initial creation and enhancement of habitats.

    • Management of the land covering at least 30 years.

    • Monitoring and reporting.

    • Ecologist or other expert’s costs.

    • Insurance.

    • Remedial work to correct any habitat management failures.

    • Machinery, tools and other staff to carry out the tasks.

    • Inflation.

    • Consulting experts to review your legal agreement.

It is important to ensure that your pricing covers all of these costs over a minimum of 30 years to meet the obligations in your BNG legal agreement. You may be able to find biodiversity unit pricing information in online marketplaces, or through your local authority and land agents. Be mindful that different locations and types of projects will have pricing variations, and your prices should be based on your own costs to deliver the units.

As a fall-back option, statutory credits have been provided by the Government and developers can purchase these. The price of these have been set high deliberately to try and avoid interfering with the private market for biodiversity units. The cheapest statutory credit for low grade land starts at £42,000 and increases to an eyewatering £650,000 for the highest valued peat lakes habitat. It is thought that to start with, whilst less land is available in the private market for offsetting, the price of statutory credits will influence the market to some degree.

selling biodiversity units, the landowner will be legally responsible for creating or enhancing habitat on their land and managing that habitat for at least 30 years to achieve the target condition.

You will have to sign a legal agreement with a responsible body or local authority which will set out how you will create, enhance, maintain and monitor the biodiversity of your registered units over a minimum of 30 years, to deliver off-site biodiversity net gain.

The details of your obligations will depend on:

    • Which option you choose for selling your units.

    • What you agree in the legal agreement and habitat management and monitoring plan (HMMP) you make when you legally secure your units.

If you fail to deliver the gain in biodiversity which you have promised, you may face enforcement action by the local authority or responsible body for the breach of your legal agreement.

You need to register your land on the government’s publicly searchable register of all off-site biodiversity projects.

As part of registering, you need to consult an ecologist who will measure the biodiversity value of your existing habitat and advise on suitable habitat creation or enhancement for the land. You will get more units per hectare if you create, enhance or restore a particular habitat that is strategic for your location. The ecologist will prepare a habitat management and monitoring plan to support your application. This must be agreed with the local planning authority or responsible body.

Before you can register your site, you must have a legal agreement in place setting out covenants in relation to the delivery, maintenance and management of the scheme. For landowners, this will normally be in the form of a conservation covenant, or it could be a Section 106 Agreement which is an agreement with the local planning authority.

You will also need to submit a completed metric tool calculation with your application to register your site for off-site gains. This is to ensure you have properly calculated the number of units you can produce on your land.

    • You could choose to sell your units independently which means you enter directly into a unit purchase agreement with the developer. Some land agents have already set up platforms to help match landowners and developers together in the same locality.

    • You could team up with local non-government organisations or other landowners to create a larger habitat bank. You could then sell units as a group. If you choose that option, you will need an agreement between the members of the group to decide who is responsible for which activities and how you will share payments.

    • You could use a habitat bank operator. The operator leases your land and pays you a fixed fee on a regular basis. The operators will act as a broker between you and the buyer of the units. The operator will arrange the legal agreement and deal with registering your site. You will need an agreement between you and the operator which covers details like who will be responsible for which activities, when and how you will receive payment and what happens if the habitat does not reach its target etc.

The short answer is yes. However, it can be quite complex to work out which schemes can be stacked on top of each other or run alongside each other on the same land. The main principle is that you cannot be paid for delivering the same environmental goods or services twice under two different schemes.

Many landowners will be concerned about loosing the benefit of agricultural property relief on inheritance tax if they put their land into a biodiversity scheme. Currently the definition of agriculture is strict. It includes land or pasture that is used to grow crops or to rear animals. It also includes:

    • Stud farms for breeding and rearing horses and grazing.

    • Trees that are planted and harvested at least every 10 years (short-rotation coppice).

    • Land not currently being farmed under the Habitat Scheme.

    • Land not currently being farmed under a crop rotation scheme.

    • The value of milk quota associated with the land.

    • Some agricultural shares and securities.

    • Farm buildings, farm cottages and farmhouses.

If land put into a biodiversity scheme is no longer used for agricultural purposes, then it will not qualify for relief. It is, therefore, worth getting advice from your ecologist before you register your site for BNG to see if the land can still be farmed in some way whilst also producing the improvements to nature and habitat. If this is not possible, you need to think carefully about the tax implications before proceeding.

The government has promised further guidance on the inheritance tax position for BNG but this is still pending at the time of this article.

We recommend landowners seek advice on the broader tax implications generally of entering into these agreements from a specialist before they sign any legal agreements.

How can Foot Anstey help?

Foot Anstey is a panel firm for the National Farmers Union and can provide farmers and other rural landowners with advice in relation to all natural capital schemes.

We have large teams of specialist lawyers in real estate, clean energy and infrastructure, planning, tax and succession, to name but a few, who can provide a wealth of experience and legal expertise in this area. We can support you through all elements of your transaction to produce environmental goods on your land.

Check out our Experts in the Field podcast, where we focus on insights and practical advice on important issues for agriculture and rural business.

Key contacts

Insights & News