Farmers and landowners should take advantage of tax changes made in the Autumn Budget as soon as possible, suggests Old Mill.
The Budget, which was announced on Monday 29 October, saw a number of the changes introduced by the Chancellor, Philip Hammond, that will impact the agricultural sector. These will be introduced over the next few years, which will be a vital transition stage with Brexit around the corner, explains Catherine Vickery, rural tax adviser at Old Mill.
One of the key changes which was not announced in the speech is a new structures and buildings allowance (SBA) which has been introduced with immediate effect. “The SBA gives a 2% capital allowance every year on any new buildings that have not yet been started or if contracts have not yet been signed,” she says. “This extra allowance might be really useful for anyone considering putting up new farm buildings.”
Also important for farmers is an increase in the Annual Investment Allowance, which will rise from £200,000, to £1m as of 1 January 2019 for two years. “For farmers or big contractors who need to invest or buy a lot of kit, this will make a substantial difference,” says Mrs Vickery. However, the two-year time cap on this means farmers should take advantage as soon as they can, rather than postponing investment.
“However, care does need to be taken with regards to timing as the year end of the business will impact on when a claim on a substantial purchase can be maximised. Unfortunately it is not as simple as purchasing after 1 January 2019, so it is crucial to take advice before committing.”
For farmers who have diversified, a reduction in business rates could result a sizeable tax break. If the rateable value of property is £51,000 or less, it means these businesses will get a reduction of one third off their current rates for the next two years. “If you’ve a farm shop, furnished holiday lets, a solar park or a number of other diversified activities, you may well benefit from this reduction,” explains Mrs Vickery.
Other benefits include the fuel duty freeze, the increase in the personal allowance to £12,500 and higher rate tax threshold to £50,000 as of April 2019 and the reduction in the employer apprenticeship contributions from 10% to 5% for small businesses.
The National Living Wage has also been increased from £7.83 to £8.21, coming into effect as of April 2019, which will likely mean that costs of employment increases for a number of farmers, explains Mrs Vickery. There have also been additional increases for those under 25 ranging from 20p to 32p per hour depending on age and whether under the apprenticeship scheme.
New restrictions have been added to Entrepreneurs’ Relief, which allows business owners a saving on capital gains tax. The qualifying period to meet the strict criteria will increase from 12 months to two years from April 2019. “To be eligible for the relief now, you will also have to meet tougher rules where the business is run through a Limited Company.
Farmers who sell or gift property they’ve previously inhabited may be stung by the tightened Principal Private Residence relief rules from April 2020. The current automatic final 18-month deemed occupation period will be reduced to nine months. Lettings relief rules have also been restricted, meaning owners will now have to have lived with the tenant to be eligible for the £40,000 relief.
“Those who are considering selling properties that could qualify for Principle Private Residence and Lettings reliefs may want to consider whether they ensure the sale takes place before 6 April 2020 to maximise the use of the reliefs,” explains Mrs Vickery. “We are yet to see the full detail on this, so we will have to wait and see if the reliefs will be ‘use it or lose it’ in the run up to 6 April 2020.”
It’s worth bearing in mind that the Chancellor has warned that should we leave Europe with no-deal, the Budget will likely be overhauled,” warns Mrs Vickery. “As it stands though, there are a number of benefits that farmers can start making the most of now.”