Autumn Statement – Tax implications for farmers

By Heather Bright, Partner and ARA specialist

The Chancellor’s Autumn Statement, while not delivering major headlines for farmers, contains several smaller yet significant impacts that require attention.

National Insurance changes

The reduction in National Insurance (NI) is a universal benefit, affecting everyone from the self-employed to employers and employees. However, with income tax thresholds remaining unchanged amidst rising inflation and living wage, it’s a balancing act of fiscal give and take.

For immediate practicality, delaying Christmas bonuses to the New Year, when the NI reductions take effect, could result in employees receiving more. However, this strategy might detract from the essence of a Christmas bonus.

Annual Tax on Enveloped Dwellings (ATED)

A less obvious but important change is the 6.7 per cent increase in ATED. This tax, often overlooked, can significantly impact agricultural businesses with properties rented to farm companies or partnerships. With the tax increase, understanding and applying for exemptions becomes crucial to avoid hefty tax bills and penalties.

Full expensing

An important aspect of the Autumn Statement is the policy on full expensing for limited companies. This policy allows for full tax relief on the cost of plant and machinery at the point of purchase, a shift from the traditional method of capital allowances which spread tax relief over several years. Initially introduced as a temporary measure set to end in 2026, it has now been made permanent.

Full expensing is exclusively available to limited companies. This means that self-employed farmers and businesses cannot claim under this policy.

For some businesses, full expensing may act more as a tax deferral rather than an outright tax saving. While 100% relief is granted at the time of purchase, there could be a potential clawback when the asset is sold or if the business ceases operations.

Changes for the self-employed

The removal of the £150,000 turnover limit for using the accrual basis accounting is a notable change for the self-employed. The option to use the cash basis might seem simpler, but it comes with caveats, such as potential complications in loan applications and the inability to offset farm losses against other income sources.

Inheritance Tax

Contrary to expectations, there were no reforms in Inheritance Tax (IHT). With political considerations and upcoming elections, significant changes to IHT seem unlikely, especially under a potential Labour government.

The Autumn Statement presents a mixed bag for farmers, with subtle changes having potentially significant impacts.

Contact us for tailored advice and support in navigating these tax implications.