Social structure, limited dispersal and spatial heterogeneity in resources are ubiquitous in wild vertebrate populations. As a result, relatives share environments as well as genes, and environmental and genetic sources of similarity between individuals are potentially confounded. Quantitative genetic studies in the wild therefore typically account for easily captured shared environmental effects (e.g. parent, nest or region). Fine-scale spatial effects are likely to be just as important in wild vertebrates, but have been largely ignored. We used data from wild red deer to build ‘animal models’ to estimate additive genetic variance and heritability in four female traits (spring and rut home range size, offspring birth weight and lifetime breeding success). We then, separately, incorporated spatial autocorrelation and a matrix of home range overlap into these models to estimate the effect of location or shared habitat on phenotypic variation. These terms explained a substantial amount of variation in all traits and their inclusion resulted in reductions in heritability estimates, up to an order of magnitude up for home range size. Our results highlight the potential of multiple covariance matrices to dissect environmental, social and genetic contributions to phenotypic variation, and the importance of considering fine-scale spatial processes in quantitative genetic studies.