Autumn 2021 Budget – Impact for farmers Kelso : Rennie Welch

Autumn 2021 Budget – Impact for farmers

The Autumn Budget offered few specific measures to help the farming industry, however there were also none of the feared potential adverse changes which have been previously predicted.

The main beneficial announcement was the extension to the temporary increase in the Annual Investment Allowance to £1m. This was due to end on 1 January 2022 but has now been extended until 31 March 2023. This will continue to help farmers investing in plant and machinery receive tax relief sooner.

Capital Gains Tax rates were not aligned to Income Tax as feared, and there were no changes to the Agricultural Property or Business Property Reliefs for Inheritance Tax (IHT). The previously suggested removal of the free Capital Gains Tax uplift on death, for estates benefiting from IHT reliefs, was also not covered, meaning that any gains from farmland or property will still be wiped on death for those farming families that pass down the farm to the next generation via Will. We would however expect that this may still be under review.

The 1.25% tax hikes to dividends and National Insurance Contributions previously announced in September were confirmed and it is worth remembering that there is also a planned increase to Corporation Tax rates on the horizon.

From 2023, companies will be liable to Corporation Tax at the rate of 19% on profits up to £50,000, and 25% on profits in excess of £250,000. Profits falling between these levels will effectively be taxed at a rate of 26.5%.

Individuals operating their business via a company will therefore benefit in reviewing the way in which they extract profits from their company going forward. For higher rate taxpayers, effective rates of tax on profits extracted by dividend could potentially reach 51.31% (and even up to 63.71% on part of the income where personal allowances are restricted!). For some, rental charges or employer pension contributions will possibly look more attractive, particularly if they fall at levels within the marginal Corporation Tax profit bands.

If you would like to discuss any of the issues covered in this article, please contact Mairi Drummond.

Mairi Drummond FCCA CTA | Mairi.drummond@renniewelch.co.uk.

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