A landowner's guide to nutrient neutrality

In simple terms, nutrient neutrality seeks to reduce the effect of nutrient pollution in waterways. The primary sources of pollution are:

  1. Residential homes, for example through untreated or partially treated sewage and wastewater entering rivers.
  1. Surface water run-off from development and agriculture on valued natural habitats. For example, fertilisers, animal waste, and slurry. 

It requires that new land developments or site upgrades in certain areas do not increase phosphate and/or nitrate levels in local watercourses beyond current levels.

Nutrient neutrality is more than a single piece of legislation and is a wider environmental policy the Government is seeking to progress through a range of legislation and incentives. The central legislation supporting this policy is The Conservation of Habitats and Species Regulations 2017 (as amended) (CHSR 2017).

Certain local authorities in England cannot allow new development to take place (i.e. will not approve planning permission) unless developers can prove their projects are 'nutrient neutral' which means they are not adding additional nutrients to the habitat in protected areas (landowners can view the map here to see if their land is within one of the catchment areas).

If a development cannot achieve nutrient neutrality on its own, developers can purchase mitigation in the same protected catchment area which is known as 'nutrient credits'. Currently, many protected areas have a very minimal supply of credits available for purchase. This 'seller's market' means there are real opportunities for landowners to enter this market. For example, a mitigation involving the removal of pigs from land, which can still be used for arable farming, is estimated to provide sufficient credits to facilitate the delivery of 5,000 homes in one affected catchment.

Following the 2024 Spring Budget, the Government announced a new Local Nutrient Mitigation Fund to enable and accelerate the delivery of projects providing nutrient mitigation to support sustainable development.

The Government has also committed to addressing the contribution of other key nutrient inputs such as agriculture. However, with the General Election further substantial changes to nutrient neutrality are unlikely to be introduced before 2025. 

Commonly asked questions

If high concentrations of nutrients (e.g. nitrogen and phosphorous), leach into watercourses, this can cause excessive algae to grow, which depletes oxygen in the water and damages aquatic life. Causes of nutrient pollution can include storm water run-off, discharge from industry, and agricultural run-off.

Taking steps to stop nutrient pollution from developments negatively impacting protected watercourses. This can include measures taken ‘on-site’ to directly prevent nutrient pollution from being generated for example:

  • Installing a local sewage treatment plant.
  • Setting part of the development aside for natural habitat development.

It can also be achieved ‘off-site’ by taking steps in the same protected area to reduce nutrients from other sources, for example:

  • Purchasing farmland upstream from a proposed development and turning this into a wildlife area.
  • Purchasing nutrient credits via a nutrient trading scheme which may be operated by a private landowner or the local authority.

Prior to development in protected areas, developers have to identify the level of mitigation required to ‘cancel out’ the nutrient pollution of a specific project (i.e. making it nutrient neutral). This is calculated as the number of nutrient credits required to offset development. A credit accounts for 1kg of total nitrogen or 1kg of total phosphate.

This can be achieved on or off-site or by purchasing statutory credits from the Government (through the Nutrient Mitigation Scheme referred to below). Landowners can provide a solution for developers looking for mitigation solutions by selling them nitrogen or phosphate credits where their land is located in the same catchment area as the proposed development.

A scheme set up by the Government in 2022 and led by Natural England (who also works with the Departments for Environmental, Food & Rural Affairs and Levelling Up, Housing, and Communities) intended to help facilitate the delivery of new homes while promoting access to green space and promoting nature recovery.

The scheme was implemented to enable developers to offset nutrient pollution by way of purchasing nutrient mitigation credits to discharge their obligations under the CHSR 2017. It is an alternative to developers undertaking nutrient mitigation at a development site or purchasing local ‘nutrient credits’.

Nutrient Mitigation Actions: A landowner can provide nutrient credits by changing the use of their land to reduce its output of nutrients. This can be achieved through a variety of means so long as an action meets Natural England’s nutrient mitigation requirements. For example, actions could include:

  • Creating new wetlands – these can have two advantages for landowners, (1) they do not necessarily preclude agricultural operations on the rest of a landholding and (2) this would likely also generate biodiversity units that can be ‘stacked’ on top of nutrient credits and sold separately to developers.
  • Septic tank upgrades.
  • Stopping or adapting activities on land – which could include stopping or adapting farming practices that give rise to substantial nutrient impacts, such as no longer using a piece of land to intensively farm pigs (possibly using it for arable farming moving forward) or changing the use of land from arable or grazing into woodland.

The nutrient offset market is still emerging. Landowners need to keep in mind that land used to provide nutrient credits will be tied up indefinitely. Natural England’s current guidance makes clear that land used for nutrient credits must be tied up for that purpose for at least 80 to 125 years. It is thought that nutrient mitigation land actions that create more proactive interventions may be worth more.

Nutrient credits available for purchase from Natural England are currently priced at £2,300 per credit.

In some local catchments offering their schemes, nitrate credits are priced at around £3,000 plus VAT per credit, and phosphate credits at around £50,000 plus VAT per credit.

Independently, landowners may enter into a bespoke agreement under section 106 of the Town and Country Planning Act 1990 (a section 106 Agreement) or a conservation covenant with a local authority and/or developer as part of a nutrient credit purchase agreement. The agreement would ensure that their land delivering the nutrient mitigation is tied up indefinitely for that purpose (a minimum of 80 to 125 years but longer if the lifetime of the development continues). It will likely need to cover how the proposed habitat will be created and how it will be managed and monitored in the future.

Landowners may also enter into an arrangement with a habitat bank operator. The operator leases a landowner’s land and pays them a fixed fee regularly. The operators will act as a broker between a landowner and the buyer of the credits. The operator will arrange the legal agreement and deal with registering the site. Landowners will need an agreement between them and the operator that covers details like who will be responsible for which activities, when, and how they will receive payment.

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 a landowner cannot be paid for delivering the same environmental goods or services twice under two different schemes.

Pre-election the Government said it is:

  • Investing £200 million in grants for improved slurry storage infrastructure and equipment over the agricultural transition period.
  • Committing £25 million to a new nutrient management theme within the Farming Innovation Programme, to help farmers manage plant and soil nutrients.
  • Consulting on modernising fertiliser product standards to support increased use of organic and recycled nutrients.
  • Introducing payment premiums into environmental land management schemes in 2024. This is intended to accelerate the uptake of certain high priority options, including those that provide benefits for water quality.
  • Continuing to conduct at least 4,000 risk-based inspections on farms each year – this is intended to ensure that slurry and other pollutants are being handled in a way that minimises pollution of the water environment.
  • Consulting on mandating Sustainable Drainage Solutions for relevant new developments, subject to a threshold. This is intended to reduce urban run-off and so reduce pressure on storm overflows as well as flood risk.

Additionally, Defra launched an additional round of the Natural Environment Investment Readiness Fund, which closed on 16 February 2024, to help farmers address barriers to accessing private investment to help nature’s recovery – including through nutrient mitigation projects.

There are likely to be further incentives and policy changes in 2025 following the general election.

The need to achieve nutrient neutrality when undertaking development in certain areas is a positive opportunity for landowners in those catchments. The market is still developing and appears to have real potential.

How can Foot Anstey help?

Foot Anstey is a panel firm for the National Farmers Union and can provide landowners with advice about all natural capital schemes.

We have large teams of specialist lawyers in real estate, clean energy and infrastructure, planning, tax and succession 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.

Discover more about our teams on our Natural Capital and Farms, Estates and Rural Land pages.

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