How does the Autumn Budget affect my farming business?

Most of the rumours leading up to the Budget proved wide of the mark. In particular, reforms to Capital Gains Tax and Inheritance Tax which we have been expecting for some time did not materialise. These taxes have a major impact on farmers, and it remains to be seen whether The Chancellor will make changes in this Parliament.

The Budget did not say a great deal about Income Tax or Corporation Tax, but there were a number of announcements made in the previous budget and more recently with the introduction of the Health and Social Levy. The personal allowances reached £12,570 in April 2021 and was then promptly frozen until April 2025. This will mean that as profits increase, that more and more people will find themselves either being dragged into paying tax or pushed into the higher tax bracket.

He also announced a few weeks ago the Health and Social Levy, which adds 1.25% to National Insurance bills. For businesses operating through a Company, the main rate of Corporation Tax is due to increase to 25%, although many farming businesses will continue to pay the small company rate of 19%. Furthermore, the rate at which dividends taken out of a company are taxed will also increase by 1.25%, the same as national Insurance rates. 

For businesses investing in plant and machinery, there was a welcome announcement in the form of an extension to the Annual Investment Allowance, which gives tax relief for investment of up to £1 million in plant and machinery at 100% against business profits. The ceiling was going to reduce to £200,000 from the end of December this year but the £1m ceiling has been extended until 31 March 2023.

Any farming business operating a diversified venture which is subject to Business Rates will welcome the extension to the 50% relief for hospitality and leisure businesses for a further year. However, many smaller tourism-related businesses will continue to benefit from 100% relief if they occupy a single building with a rateable value of less than £15,000.