How does the Spring Budget affect me and my farm?

The new Chancellor Rishi Sunak delivered his first budget after only a month in office on 11 March. Coronavirus had only started to take hold of the country and relief for some businesses did feature in the budget. Since then the government has announced drastic levels of expenditure, The coronavirus support is covered in another article in this newsletter. This article concentrates on the remainder of the Spring Budget announcements. There was much in the press leading up to the Budget about potential changes that would impact farming business dealing with these first:

• The potential loss of the lower fuel duty on red diesel was on the cards. For now farmers, have been excluded from the increased fuel duty and continue to benefit from the lower rate, saving 46.6p/litre.
• Changes to inheritance tax (IHT) relief were mooted by various groups. See separate article in the newsletter.

Other Budget announcements included:

• The rate at which national insurance is paid has had a significant increase to £9,500. This will save the self employed farmer £64 a year, and for those who run their business through a limited company and pay themselves a tax efficient salary, they have a choice to pay a higher salary, and pay a small amount of employers national insurance, (due to the employers rate only increasing to £8,788), or have a lower salary so the company doesn’t pay national insurance.
• Entrepreneur’s relief (ER) was potentially facing the chop. This relief allows gains on the cessation of a business to be taxed at 10%, instead of up to 28%. While ER was not abolished, it has been scaled back. Where previously gains of up to £10m could qualify for ER, this has now been reduced to £1m. While for most people £1m of gains on the cessation of a business would be fine, for those farmers, who sell land for development, this could nearly double the potential tax liability.
• If you run your business through a company, the Chancellor confirmed that the rate of corporation tax will remain at 19% and not decrease to 17% as was announced in a previous budget. This still leaves corporation tax at a low level and often a tax efficient way to run your business.
• Pension relief has often been targeted in previous Budgets. In this Budget, the Chancellor has been kind. Previous restrictions on relief for pension contributions applied if your total income was over £110k. This limit has been increased to £200k. If your income does exceed this limit the relief on pension contributions could now be as little as £4k instead of the previous £10k limit.
• If you have built a new building since 28 October 2018, and the building is in use, after 1/6 April, the allowance increases from 2% to 3%.
• From the 2021/22 tax year cars with emissions over 50g/km will be in the special rate pool, meaning relief at 6% instead of 18%. Currently the limit is 110g/km. This would mean that after the next tax year it will take a longer time to gain full tax relief for new cars.

There were no changes to the personal allowance and the basic rate band limits in the Budget and none were expected following the early increase of these by Phillip Hammond in the last Budget.