Hello, is it safe to place a lambs wool underlay that I purchased from baby bunting, on my sons cot under a fitted sheet? This is for a 12 month old, thank you

Red Nose recommends that you use a firm mattress for baby.
If the woollen underlay takes away from the firmness of the mattress, then it would not be recommended for use.
Never put soft bedding under the bottom sheet, such as a sheepskin, as this makes the sleeping surface too soft
https://rednose.org.au/article/what-is-a-safe-mattress

It is especially important when your baby rolls onto his tummy, that the mattress is still firm, & not a soft surface as may be created by a woollen underlay.
https://rednose.org.au/article/what-do-we-do-now-that-a-baby-has-started-to-roll-over