1) Increased atmospheric nitrogen deposition has shifted plant dominance from ericaceous plants to grass species. To elucidate the reduced competitiveness of heather, we tested the hypothesis that additions of nitrogen reduce the concentrations of phenolics and condensed tannins in ericaceous leaves and retard mycorrhizal colonisation in ericaceous plants. We also tested the negative effects of reduced light intensity on carbon-based secondary compounds and mycorrhizal colonisation in ericaceous plants. (2) We performed a field inventory at three heathland sites in the Netherlands varying in nutrient supply and light intensity. Leaves of ericaceous plants and grasses were collected and analysed for concentrations of tannins, phenolics and nutrients. Similarly, we took root samples to record mycorrhizal colonisation and soil samples to measure the soil mineralisation. In addition, we conducted two-factorial experiments with Calluna vulgaris plants, in which we varied fertiliser and shade levels under greenhouse and field conditions. (3) The field inventory revealed that nitrogen addition and shading both negatively affected the concentration of total phenolics. The total phenolics and condensed tannin concentrations were positively correlated (P < 0.001), but in the field experiment, the condensed tannins were not significantly affected by the treatments. Our results provide the first evidence that the carbon nutrient balance can be used to predict the amount of total phenolics in the dwarf shrub C. vulgaris. (4) In the field experiments, shading of plants resulted in significantly less mycorrhizal colonisation. Only in the greenhouse experiment did addition of nitrogen negatively affect mycorrhizal colonisation. (5) Our results imply that increased atmospheric nitrogen deposition can depress the tannin concentrations in ericaceous plants and the mycorrhizal colonisation in roots, thereby reducing the plants’ competitiveness with respect to grasses. Additionally, if ericaceous plants are shaded by grasses that have become dominant due to increased nitrogen supply, these effects will be intensified and competitive replacement will be accelerated.