Autumn Statement an anti-climax but with key exceptions
Victoria Ivinson of accountancy firm, Douglas Home and Co, reviews last week’s autumn statement for us and picks out the important points for farmers:
WITH the cost of living at its highest for 40 years, Chancellor Jeremy Hunt’s recent Autumn Statement was highly expected to have deep and far-reaching consequences.
The feeling surrounding the farming industry now seems to be that the measures have made for something of a non-event for many farming businesses, though by no means all.
With Brexit, labour shortages and the war in Ukraine’s huge market distortions, the cost-of-living crisis is the latest storm that farmers have had to weather.
One of Hunt’s hurdles that will require jumping is the change to Research and
VICTORIA IVINSON
Development Tax regulation. This significant adjustment will see a cut in the relief to 86% from 130%.
This is an area that we have long-advised farming businesses to utilise. That’s because a key part of the successful running of most farms is problem solving – the constant striving to provide solutions to challenges.
Done intelligently and thoroughly, R and D has allowed farmers to gain huge tax relief for their considerable efforts for some years. While still a healthy relief, the changes to the taxation will definitely leave farmers using it feeling hard done by and likely needing to adapt.
The Chancellor also announced a reduction to capital gains tax-free allowance, halving to £6000 for the 2023/4 tax year and a further fall to £3000 from April, 2024.
Although farmers will certainly feel an impact on their wallets, we’re by no means urging farmers to use this as the basis to sell assets like farmland, or housing before the changes come in, but simply to sell assets when it is right, bracing themselves to account for losing an extra sum when that time comes.
With minimum and living wage also on the rise next year, this will no doubt have an impact on most if not all employers, including those in the rural sector who will undoubtedly have to up their wage bill. This could have a big cumulative impact on farms that require large amounts of manual labour.
Of course, many of Scotland’s farmers will be eager to see the First Minister’s take on devolved matters, in particular Income Tax. South of the Border the personal allowance has remained frozen at £12,570, with the threshold for the 40% rate remaining at £50,270.
The 45% additional rate of income tax will be lowered from £150,000 to £125,140 in April, 2023. It is highly likely that Scotland will – at the very least – match this.
Even though further implications await in the upcoming Spring budget, we’re definitely not urging our farming clients to rush to us in panic. While everyone is feeling the squeeze across the board, there is, sadly, not a great deal farmers can do to combat changes in the immediate future that will make major differences to their finances.
Although farming businesses have not been hit in places, the sector isn’t especially exposed to the budget – instead, it is simply another road bump on what is, at present, an especially bumpy track.