Intraspecific variation is necessary for evolutionary change and population resilience, but the extent to which it contributes to either depends on the causes of this variation. Understanding the causes of individual variation in traits involved with reproductive timing is important in the face of environmental change, especially in systems where reproduction must coincide with seasonal resource availability. However, separating the genetic and environmental causes of variation is not straightforward, and there has been limited consideration of how small-scale environmental effects might lead to similarity between individuals that occupy similar environments, potentially biasing estimates of genetic heritability. In ecological systems, environments are often complex in spatial structure, and it may therefore be important to account for similarities in the environments experienced by individuals within a population beyond considering spatial distances alone. Here, we construct multi-matrix quantitative genetic animal models using over 11,000 breeding records (spanning 35 generations) of individually-marked great tits (Parus major) and information about breeding proximity and habitat characteristics to quantify the drivers of variability in two key seasonal reproductive timing traits. We show that the environment experienced by related individuals explains around a fifth of the variation seen in reproductive timing, and accounting for this leads to decreased estimates of heritability. Our results thus demonstrate that environmental sharing between relatives can strongly affect estimates of heritability and therefore alter our expectations of the evolutionary response to selection.