Trading rules and irreplaceable habitat in BNG
A biodiversity metric can show a positive percentage and still fail the trading rules. Here is how the distinctiveness bands, risk multipliers and irreplaceable habitat carve-out actually work on a major site.
A biodiversity metric output can show a healthy percentage gain and still fail. The trading rules sit alongside the headline figure as a separate pass or fail test, and they ask a different question: has each habitat that the scheme destroys been replaced by something of the same type or better? A scheme that clears species-rich grassland and compensates with amenity grassland and a few hundred metres of hedgerow can produce a positive number on the summary sheet and still be unlawful in net gain terms. Understanding bng trading rules and irreplaceable habitat treatment early is what stops a land budget being rewritten at the biodiversity gain plan stage, months after permission.
Mandatory net gain comes from the Environment Act 2021, which inserted Schedule 7A into the Town and Country Planning Act 1990. It applies a deemed planning condition: development may not begin until the local planning authority has approved a biodiversity gain plan showing at least a 10 per cent uplift, secured for 30 years. Majors have been caught since 12 February 2024 and small sites since 2 April 2024.
What the trading rules require by distinctiveness band
The statutory metric sorts every habitat parcel into a distinctiveness band, and each band carries its own replacement rule. The bands run from very high down to very low, and the rule tightens as distinctiveness rises.
| Distinctiveness of habitat lost | What the metric will accept as compensation |
|---|---|
| Very high | Bespoke compensation agreed with the authority, usually with Natural England input. The metric will not clear it on its own |
| High | The same habitat type, in the same or better condition |
| Medium | The same broad habitat group, at the same distinctiveness or higher |
| Low | Any habitat of low distinctiveness or above |
| Very low | No replacement rule applies |
Two things follow from that table. The first is that a high distinctiveness loss cannot be bought off with area. Ten hectares of new low distinctiveness grassland does not compensate for half a hectare of lowland meadow, however the arithmetic falls out. The second is that the rules bite on habitat type, not on the unit total, so the design team needs to know what is on the ground before the layout is fixed rather than after.
Watercourses and hedgerows run through their own modules with their own trading rules. A hedgerow loss is compensated with hedgerow, and a river unit with river. You cannot move units between the area, hedgerow and watercourse modules at all. That catches schemes where a culverted watercourse is dealt with as though it were part of the site area.
Like for like and like for better in practice
Like for like means the same habitat type at the same condition. Like for better means a higher distinctiveness band, or the same type in better condition. Both satisfy the rule. Trading down does not.
In practice the argument on a residential scheme is usually about condition rather than type. An ecologist records the retained grassland as moderate condition, the design proposes to deliver good condition, and the authority's ecologist asks what management will actually achieve that within the timescale claimed. Condition criteria in the metric are assessed against published condition sheets, so the answer has to be a management regime rather than an assertion. Cutting regimes, grazing, arisings removal, and who pays for it in year 18.
And there is a quieter problem. Habitats that look poor on a walkover can score higher than expected once the condition sheets are applied, particularly scrub, and a site walkover done in February by someone working from aerial imagery will miss it. That is the single most common reason a metric gets reworked between pre-application and submission.
Irreplaceable habitat and why the metric does not apply
Irreplaceable habitat is carved out of the net gain regime entirely. The Biodiversity Gain Requirements (Irreplaceable Habitat) Regulations 2024 list the habitats that qualify, including ancient woodland, ancient and veteran trees, blanket bog, limestone pavement, coastal sand dunes and lowland fens. Where a development affects one of them, the 10 per cent requirement does not apply to that habitat, because the premise of the metric is that the habitat can be recreated somewhere else and here it cannot.
That is not a relaxation. The biodiversity gain plan must instead set out the adverse effect on the irreplaceable habitat, the steps taken to avoid and reduce it, and any bespoke compensation agreed with the authority. National policy in the National Planning Policy Framework, current edition published 17 August 2026, treats loss or deterioration of irreplaceable habitat as something to be refused other than in wholly exceptional circumstances with a suitable compensation strategy. The practical effect on a land appraisal is that an ancient woodland edge or a veteran oak is a constraint to design around, not a cost line to price.
Buffers matter here too. Standing advice from Natural England and the Forestry Commission asks for a buffer around ancient woodland, and a root protection area around a veteran tree calculated under BS 5837:2012 will usually be larger than people expect. Design the layout to the buffer and the metric problem often disappears on its own.
Spatial and temporal risk multipliers
Off-site units are discounted twice. The spatial risk multiplier reduces the value of units delivered further from the impact: full value inside the same local planning authority area or National Character Area, three quarters in a neighbouring one, and half beyond that. The temporal multiplier discounts habitat that takes years to reach its target condition, applying a 3.5 per cent annual discount over a maximum of 30 years.
The temporal discount is the one that reshapes deals. A habitat type that takes 25 years to reach good condition loses most of its value before it is counted, which is why creating habitat in advance of the impact is worth so much: habitat already delivered attracts no temporal penalty. On a phased scheme, the ecologist and the programmer need to be in the same meeting.
A third multiplier, difficulty of creation, sits alongside them and reduces units for habitat types that are hard to establish. It is applied by the metric automatically once the habitat type is selected, so the lever available to the applicant is habitat choice at design stage. This is exactly the sort of calculation where an independent Biodiversity Net Gain Assessment has to be run by a competent person: the Environment Act 2021 regime expects the statutory metric to be completed by someone with the relevant competence, and the authority will check who signed it.
Off-site units and the credit of last resort
The hierarchy is on-site first, then off-site, then statutory biodiversity credits. Off-site units come either from land the applicant controls or from a habitat bank, and both have to be secured for 30 years through a section 106 agreement or a conservation covenant and registered on the biodiversity gain sites register before the gain plan can rely on them.
Statutory credits are sold by the government as a last resort and are priced deliberately above the market rate so that they do not become the default. Prices sit in a published tier schedule that changes, so check the current schedule rather than a figure quoted in an old appraisal. Two credits are required for each unit replaced in some tiers, which surprises people who budget one for one.
The wider report bundle for a major scheme will normally include the net gain work alongside a preliminary ecological appraisal and, where protected species are present, survey work that a licensed ecologist has to carry out under the Wildlife and Countryside Act 1981 and the Conservation of Habitats and Species Regulations 2017. Net gain does not replace any of that.
Recording the outcome in the biodiversity gain plan
The plan is filed after permission and before development begins, and it has to state the pre-development biodiversity value, the date that value was assessed, the steps taken to follow the mitigation hierarchy, the post-development value including off-site units and credits, and the position on any irreplaceable habitat. Our guide on what goes in a biodiversity gain plan walks through the form field by field, and the trading down and off-site sections deal with the part that most often comes back with questions.
Watch the pre-development date. Value is normally taken at the date of the application, but where habitat has been cleared or degraded since 30 January 2020 the authority can assess the value as it stood immediately before that clearance. Site clearance carried out to tidy a site ahead of marketing has cost landowners real money under that provision.
Where a scheme fails despite a positive percentage
An illustrative example. A 9 hectare edge of settlement site carries 1.2 hectares of hedgerow, a block of dense scrub of medium distinctiveness and the rest arable. The layout keeps the hedgerows, removes the scrub, and delivers public open space as modified grassland plus street trees. The area module returns a gain of about 14 per cent. The trading rule for the medium distinctiveness scrub is not met, because modified grassland sits a band below and is not in the same broad habitat group, so the metric returns a trading rule failure and the gain plan cannot be approved as drafted. The fix is either scrub creation within the open space or off-site units of the same broad habitat group. Figures here are illustrative only.
Three checks stop most of these. Read the trading rule result on the metric summary sheet, not just the percentage. Confirm every off-site unit has a spatial multiplier the assessor has actually applied. And confirm that anything on the irreplaceable list has been taken out of the metric and dealt with separately in the plan.
This is general guidance, not legal advice; check the position with your local planning authority or a qualified professional before relying on it. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval. For specialist technical reports, qualified professional input may be required.
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Frequently asked questions
Can a high distinctiveness habitat loss be compensated with a larger area of low distinctiveness habitat?
No. The trading rules require high distinctiveness habitat to be replaced with the same habitat type in the same or better condition, whatever the area involved. Adding a large area of low distinctiveness grassland can lift the headline percentage while the metric still reports a trading rule failure, and an authority cannot approve a biodiversity gain plan in that state.
Does the 10 per cent net gain requirement apply to ancient woodland?
Not through the metric. Ancient woodland is listed as irreplaceable habitat in the Biodiversity Gain Requirements (Irreplaceable Habitat) Regulations 2024, so it sits outside the percentage calculation. The biodiversity gain plan must instead record the adverse effect, the steps taken to avoid and reduce it, and any bespoke compensation agreed with the local planning authority.
How much are off-site units discounted if they are outside the local planning authority area?
The spatial risk multiplier gives full value to units inside the same local planning authority area or National Character Area, three quarters in a neighbouring one, and half beyond that. A unit bought two counties away therefore delivers half of what the habitat bank advertises, so compare offers after the multiplier rather than before.
When does the biodiversity gain plan have to be approved?
After planning permission is granted and before development begins. The deemed biodiversity gain condition under Schedule 7A to the Town and Country Planning Act 1990 blocks a start on site until the local planning authority has approved the plan, so the approval sits on the critical path for site start rather than at the application stage.
Who is allowed to complete the statutory biodiversity metric?
The regime expects the metric to be completed by a competent person, which in practice means an ecologist who can defend habitat classification and condition assessment against the published condition sheets. Local authority ecologists routinely check who carried out the survey and when, and a metric based on a winter walkover is often sent back.
What happens if habitat was cleared before the application was submitted?
Where habitat has been cleared or degraded on or after 30 January 2020, the local planning authority can assess the pre-development biodiversity value as it stood immediately before that clearance. Tidying a site before marketing it can therefore raise the baseline the scheme has to beat rather than lower it.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.