On Wednesday 11 March the new Chancellor, Rishi Sunak, delivered his first Budget after only a month in office. It was obviously dominated by the Coronavirus and the measures being taken to address the crisis. Much has happened in the world since and many of the announcements have now been updated.
However, some key points still remain relevant to the rural community.
The main item which had been billed for change for farming families was Entrepreneurs’ Relief. This relief can reduce the Capital Gains Tax rate on certain business assets from 20% to 10%. It had been feared that Entrepreneurs’ Relief would be removed entirely. However, the lifetime allowance will be reduced from £10m to £1m instead of removing it entirely. In theory, this will effect few taxpayers, but will obviously have a significant impact on those who do go above this limit. It’s not uncommon for those selling farms or land for development to go over the £1m limit. Early discussions about ownership are now even more important to minimise Capital Gains Tax bills.
Fuel Duty Relief for red diesel
The Chancellor announced that he was ending the Fuel Duty Relief on red diesel. This would have had a huge impact on the farming industry. However, much to every farmer’s delight he added that the relief will continue for the agriculture industry. Rishi Sunak also chose to retain the freeze on Fuel Duty rates at the pumps for another 12 months – more good news for farmers.
Annual Investment Allowance
As anticipated, the Annual Investment Allowance remained unchanged at £1million until 31 December 2020. This still provides farming businesses with a huge incentive to invest in plant and machinery by receiving immediate tax relief on the investment.
Structures and Buildings Allowance
Some further good news came with the increase in the Structures and Buildings Allowance rate. This means anyone building a new non-residential building or structure (such as sheds or improvements to existing buildings) can obtain tax relief on this expenditure at an increased rate of 3%. Both a reduction in tax and a drop in interest rates have made building new structures more affordable for the farming community.
The chancellor also increased the Employment Allowance. For any business that has Class 1 National Insurance contributions below £100,000 per year, the allowance has been increased from £3,000 to £4,000 from April 2020.
HMRC have announced that from Friday 6 April 2020 the eligibility rules for claiming the Employment Allowance will change. Before you claim you will now have to make extra checks to find out if you are eligible to claim.
You should seek advice from us as to whether you qualify, but this should benefit many farming businesses.
Pension contributions for high earners
The Chancellor also announced that the income threshold that restricts the amount high earners can contribute to a pension from £40,000 to £10,000 would no longer apply to those with income under £200,000.
Overall the Budget had less impact than anticipated and instead has given farmers much-needed tax breaks. Thankfully, changes to Inheritance Tax reliefs did not materialise and so Agricultural Property Relief lives on.
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