Relief as Government’s Autumn Statement looks to leave agricultural sector largely unaffected.
“Inflation is even more insidious than taxes”, said Chancellor Jeremy Hunt in the government’s Autumn Statement on 17th November, before announcing measures to spur growth and drag the economy out of fiscal freefall.
For those in the farming industry braced for sweeping measures that might negatively impact their bottom line, Mr Hunt yielded no such surprises. In fact, he’s tried to do as little as possible to shore up the nation’s finances and ease collective unease that has been growing like a particularly aggressive algae bloom.
The only real tax-raising measure the sector needs to be aware of is the lowering of the band at which the top tax rate applies and will be lowered from £150,000 to £125,140 from April 6th. With all other tax thresholds frozen until 2028, this will create fiscal drag that will slowly shore up the government tax receipts over time through stealth tax rises as earners increase.
What does the Statement mean specifically for agricultural and landowning businesses? Many in the sector have feared that agricultural property relief and business property relief might disappear or be reduced for Inheritance Tax - but these concerns remain an abstract idea, one that hasn’t materialised into a tangible concern.
The impact the sector will feel, however, is from the rise in the National Living Wage to £10.42p/h from April next year. This will no doubt have a huge impact on businesses involved in the food production sector, with it being so incredibly labour-intensive. They will have to look carefully at their outgoings and profit margins to ensure that they can absorb this sizeable increase.
There was also a lot of speculation about Capital Gains Tax (CGT) rates increasing, but there has been no mention of this since. The annual exemption for individuals for CGT though is set to be gradually lowered, from £12,300 a year currently to £6,000 from April 2023 and then a mere £3,000 from April 2024. This could negatively impact individuals who have the opportunity for small capital disposals as it may result in them paying more than is true under the current exemption and ultimately lead to them paying higher taxes. A good example of this could be someone who has a small option payment on land on which a developer might be looking to build houses. Under the current exemption, there would be virtually no tax to pay, but by 2024, that could be a very different story…
Will the levy on energy affect diversified farmers with wind or solar generation systems? No, I wouldn’t expect so, but those who do exceed the threshold can easily pass the 45% levy down the line if the terms of the supply agreement allow it.
Overall, the Autumn Statement is encouraging news for those in the agricultural sector, as the Chancellor demonstrates a very tactful tightrope walk between calming the nerves of financial markets and offsetting fiscal freefall through very reasonable tax increases.
True, it is a tax rise in all but name without making explicit reference to those terms for much of it, and it leaves a lot of onus on the future fiscal drag, but the Government has shown remarkable restraint on spending cuts, maintaining budgets for the NHS, capital investment and R&D. The markets are yet to react, but this is good news - as it shows none of the hallmark hysteria that ensued ex-PM Liz Truss’ disastrous mini-budget.