Autumn Budget: How will it affect farmers?
28th October 2021
Critics have noted that there are few specific measures to help farmers in the Chancellor’s latest budget, however some announcements could offer a boost to certain sectors. Farmers Guide took a look at the key points…
Announcing the Autumn Budget yesterday, Rishi Sunak said it does not draw a line under Covid, but begins the work of building an economy post-pandemic.
With farmers facing the toughest challenges they have seen in decades, some farming and rural groups have criticised the budget for missing opportunities to support the sector, and failing to include specific measures to help farmers.
Despite that, the budget highlighted some opportunities for farmers.
Extension of Annual Investment Allowance
News that the Annual Investment Allowance has been extended to 31st March 2023 – it was originally due to end on 1st January 2022 – has been welcomed and will benefit those investing in their business’ plant and machinery.
Head of farming for Strutt & Parker, Jonathan Armitage commented: “The ability to claim 100% tax relief on qualifying plant and machinery does at least help to support investment, which is likely to be required as part of a strategy to develop robust, sustainable businesses for the future.
“Saving tax should not be the driving factor in making investment decisions within a farming business. However, it is a very useful tool where capital expenditure is being planned.”
Alcohol duty changes
The end of premium duty on sparkling wine is good news for the UK’s growing wine sector, and lower duty on draught beer and cider could also help on-farm drinks manufacturers and potentially benefit growers of barley, hops and apples, explained NFU Mutual farm specialist Chris Walsh.
Green property improvements
The new Green Investment Relief, which encourages businesses to adopt green tech such as solar panels, provides incentives for farmers to invest in green property investments.
NFU president Minette Batters criticised the budget for its lack of focus on net zero funding as a “missed opportunity”, with COP26 only days away. However, the business rates investment relief for green technology is a “positive move” to support investment in renewable energy, and “may help in UK farming’s ambition to achieve net zero by 2040,” she said. More detail is needed to determine the impacts this will deliver on farm, however.
Diversifying businesses
The Chancellor’s announcement on the new one-year 50% business rates discount for companies in the retail, hospitality and leisure sectors was also broadly welcomed, and will support businesses such as farm shops in their recovery from the pandemic. NFU Mutual noted that this measure could encourage farmers planning to diversify to take the plunge – but smaller farms may be better off using the already-available Small Business Rates Relief.
Lack of tax changes
After tax hikes to dividends and National Insurance Contributions were announced in September, NFU Mutual noted that the budget contains no major tax changes that would affect farmers.
Chartered financial planner Sean McCann said: “Despite calling for a review into Capital Gains Tax last year, the only change the Chancellor made to the tax was extending the time to report and pay tax due on gains from residential property from 30 days to 60 days, a welcome change which gives people more time to pay the tax after selling or gifting residential property.
“Capital Gains Tax rates was not aligned to Income Tax as feared, and there was no change to the way it relates to estates that have already benefited from Agricultural and Business Property Relief.
“This means any gains from farmland or property are still wiped on death for those farming families that pass down the farm to the next generation with a reduced inheritance tax bill.”
Rural and farming groups criticised the budget for missed opportunities in terms of plans to develop export strategy, boost the rural economy, or provide net zero funding.
Missed opportunities
As British farmers currently face huge pressures from increased feed, fertiliser and energy costs, alongside crippling labour shortages, many hit out at the budget for its lack of specific assistance.
Ms Batters said it was “disappointing” to hear nothing from the Chancellor on government plans to develop its export strategy, helping UK farmers to grow their market overseas. This could have included funding for dedicated agricultural counsellors, or details on overhauling government procurement practices to increase the provision of fresh and nutritious British food in schools, hospitals and other public sites.
Meanwhile the Country, Land and Business Association slammed the budget as showing ‘no ambition’ for the countryside, and criticised the Chancellor for ignoring plans to help level up the countryside.
Vice president Victoria Vyvyan commented: “The rural economy is 18% less productive than the national average, largely due to poor infrastructure, poor skills provision and an outdated planning regime. As a result, underemployment and deprivation take root.”
But if the ‘levelling up’ agenda was brought to the countryside and focused on the productivity gap, she argued up to £43 billion could be added to the economy. “Today was a missed opportunity,” she added.
She also called for further action on the rural housing crisis by supporting small-scale developments – adding small numbers of homes to a large number of villages, helping to provide good housing for local people while boosting the local economy.
Speaking broadly on the Budget, Strutt & Parker’s Jonathan Armitage said. “[…] it is the absence of any immediately obvious bad news for the rural sector that probably looks to be the biggest win. It’s possible, though, that this could change over the coming days as further details emerge from the small print in the hundreds of pages of accompanying documents.”
