Biodiversity Net Gain for farmers: Turning nature into a new revenue stream

In East Cambridgeshire, 100 acres of low-yield farmland have been transformed into wildflower meadows, woodland and wetlands. Located in one of the UK’s most ecologically important landscapes, the site demonstrates how Biodiversity Net Gain (BNG) can turn nature into a new asset class. In this blog we explore how landowners can utilise BNG to help them replace lost subsidies with long-term, environmentally driven income.

What is Biodiversity Net Gain?

Under the Environment Act 2021, most new developments in England must achieve a 10% increase in biodiversity, ensuring that habitats are left in a measurably better state than they were before construction. This biodiversity uplift is calculated using standardised biodiversity units, based on the type, size, location and quality of habitat.

This presents a major opportunity to farmers. Instead of being passive stakeholders in the planning system, landowners can actively create or enhance habitats such as meadows, woodland, and wetland. In doing so, they can generate biodiversity units to sell to developers who cannot meet their BNG obligations on-site.

Now is a great time for farmers to act, because BNG is approaching a pivotal moment. As the Basic Payment Scheme (BPS) is phased out under the Agricultural Transition Plan, farms across England face significant income loss. Environmental Land Management schemes (ELMs) are still evolving and oversubscribed. At the same time, developers are under growing pressure to comply with environmental standards, pushing up demand for off-site BNG credits. DEFRA has set eye-catching statutory prices for its own credits, ranging from £42,000 to £650,000 per unit. This is encouraging developers to seek more cost-effective deals with private landowners.

Developers can meet BNG requirements in three ways:

on-site (within the red line of the development),
off-site (elsewhere), or
by purchasing statutory credits as a last resort.

The off-site market is where landowners can step in, provided they register their land on the national biodiversity gain site register and enter into a legal agreement securing 30 years of habitat maintenance.

Tax rules secure Inheritance tax relief

One of the biggest early deterrents for landowners was the ambiguity around tax treatment. Would land in a BNG scheme qualify for Agricultural Property Relief (APR) or Business Property Relief (BPR)? The concern was understandable: a 30-year commitment to ecological stewardship might disqualify land from key Inheritance tax reliefs.

From 6 April 2025, land under qualifying environmental management, including BNG agreements, has been eligible for APR. In many cases, BPR will also remain available, particularly where the landowner remains actively involved in habitat creation and maintenance.

This change removes a major barrier to participation. Farmers and landowners can now engage with BNG markets without jeopardising their long-term tax planning or succession strategies. But eligibility will depend on how agreements are structured and managed, so legal and tax advice remains essential.

Other tax considerations also apply. VAT is chargeable on the sale of biodiversity units, and capital gains or income tax may be due depending on how agreements are structured. For companies, the treatment of revenue and costs over the multi-year lifecycle of a BNG agreement should be planned in advance.

The legal landscape: control, covenants and 30-year commitments

BNG is underpinned by legally binding mechanisms. For most transactions, this will take the form of either a Section 106 agreement with the local planning authority, or a Conservation Covenant, a newer legal instrument introduced under the Environment Act 2021.

Both mechanisms commit land to environmental use for a minimum of 30 years. That means landowners are obligated to maintain the ecological integrity of the site for the full term, with regular monitoring, reporting and sometimes third-party enforcement. While this commitment can generate stable income, it also limits land use flexibility and could affect financing, tenancy, and resale arrangements.

Any decision to enter the BNG market should be approached with the same rigour as a development project or major land sale. Clear legal advice is vital to ensure agreements don’t inadvertently constrain future use or introduce risk. Farmers may consider setting up a separate legal entity, such as a landholding company or trust, to isolate obligations and liabilities.

What do developers need from farmers?

From a planning perspective, BNG is now baked into the development system. All major applications must demonstrate how they will achieve their biodiversity uplift, whether on-site, off-site or via statutory credits. Local authorities are increasingly requiring developers to evidence these commitments early in the planning process, before consent is granted.

This creates a real opportunity for landowners. A well-designed BNG site, properly registered and transparently managed, becomes a valuable asset for developers looking to meet their obligations quickly and efficiently. But to be credible, it must align with Natural England’s habitat creation metrics and pass a rigorous assessment of baseline conditions, uplift potential and long-term management.

The strongest opportunities lie in areas with high development pressure but limited natural land. These might be in the fringes of urban areas, or in low-yield arable zones where land value is below its environmental potential. Competition from renewable energy developers – particularly for solar – is also intensifying, so choosing between land uses requires a clear strategic plan.

Practical advice for farmers entering the BNG market

For farmers considering whether to enter the biodiversity market, the process isn’t complex, but it must be taken seriously. The right approach starts with feasibility and ends with delivery. Here’s a simplified checklist to help get started:

Identify suitable land: Focus on marginal or unproductive fields with low yield potential but strong restoration value.
Commission a baseline survey: Ecologists must assess current biodiversity to calculate potential uplift.
Create a habitat enhancement plan: Define how you’ll create, improve and maintain the land to generate units.
Register your site: BNG sites must be listed on the national register to be eligible for trade.
Secure legal agreements: Work with planners and legal advisors to set up Section 106 or Conservation Covenants.
Market your credits: Partner with land agents or platforms to connect with developers and negotiate terms.

It’s worth noting that the market is still developing. Natural England’s statutory register and the biodiversity metric tools are evolving, and local authority processes vary.

An emerging market, not a guaranteed fix

BNG is not a simple subsidy replacement, nor a guaranteed income stream. It is a sophisticated, evolving market. Like all markets, it carries both opportunity and risk. For farms with surplus or low-productivity land, it offers a chance to monetise nature in a structured, compliant way. For those under pressure to diversify income or future-proof the business against subsidy loss, BNG could become a critical part of the financial mix.

However, the commitments are long-term, the rules are still bedding in, and ecological outcomes must be delivered and maintained. As with any diversification, success depends on choosing the right sites, partners and legal structure.

The farmers who benefit most from BNG will be those who approach it not just as a scheme, but as a strategic investment in land and landscape; one that yields both financial return and ecological legacy.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.