Welcome to our agriculture 2016 Budget review

Following a year in which the Chancellor had a pre-election Budget in March, a surprise summer Budget in July and an Autumn Statement in November, on 16 March the Chancellor delivered his first Budget of 2016.

In this agriculture 2016 Budget review we summarise the key points and developments arising from the 2016 Budget and focus specifically on what the changes may mean for the agriculture sector.

Budget summary (agriculture specific):

  • Increases in business rate relief for small businesses
  • Corporation Tax will be cut to 17% by 2020
  • New stamp duty rates for commercial property from 17 March 2016
  • Fuel duty to be frozen again
  • £700m for flood defences
  • Capital Gains Tax rates will be cut from 6 April 2016
  • Personal Allowance to increase to £11,500 in April 2017
  • Higher-rate threshold will increase to £45,000 in April 2017

Agriculture 2016 Budget impact

Not much change for the agriculture sector

Richard Marsh, Partner at Hawsons, commented: “Overall, the 2016 Budget was a bit of a non-event for the agriculture sector, with there largely only being minor changes. Having said that, the changes to the small business rate relief, freezing of fuel duty and changes to income tax are all good news and will of course be welcomed by the agriculture sector. The announcements made in the 2016 Budget will likely bring the biggest benefit to smaller and incorporated farms and agricultural businesses.”

Freezing of fuel duty

The fuel duty freeze will be extended for another year, taking it to 6 years at the current rate at the end of 2016/17. This is good news for the agriculture sector and will be welcomed by the farming community, particularly ahead of the 2016 harvest where using large amounts of fuel is unavoidable.

Business rate relief for small businesses

The Chancellor announced a progressive approach to business rates, with the business rate relief for small businesses more than doubling from £6,000 to £15,000. This increase to the annual limit will exempt thousands of small businesses, with 250,000 businesses paying less in business rates.

The changes to business rate relief are good news for those farms that have diversified their offering.

Farmers’ averaging

The government had already confirmed the changes to farmers’ averaging that the current two year averaging period will not be replaced (as was speculated) but it will be added to. From 6 April 2016 farmers will now have the option to elect for either a two year or a five year averaging period.

You can find more detailed on the farmers’ averaging changes here.

Commercial stamp duty 

Following last year’s reform of residential stamp duty, the Chancellor announced that commercial stamp duty will be reduced for small businesses with a zero threshold for commercial properties with a value of up to £150,000 and 2% on the next £150,000.

This new tax regime on commercial stamp duty comes into force on 17 March 2016.

Corporation tax

Corporation tax rates were once again cut by the Chancellor in the 2016 Budget, which will of course bring tax opportunities for small businesses and their owners. The tax rate currently stands at 20% and was proposed to fall to 18% by 2020 (announced in the 2015 Budget), but will now fall to 17%.

The below table shows have corporation tax rates have been on a downward trend in recent years.

Corporation tax rates 2016 Budget

A reduction in corporation tax rates will likely have a knock-on effect on business confidence.

Richard added: “A further reduction to corporation tax by 2020 is good news, but will not have a significant impact on the agriculture sector. The changes will only help the estimated 10% of farming businesses that currently trading under a company structure, which means around 90% of businesses (that are unincorporated) in the sector will be unaffected.”

Investment for flood defences

There was good news for the sector in the shape of a £700m investment commitment for flood defences schemes, including projects in York, Leeds, Calder Valley, Carlisle and across Cumbria. The agriculture sector was one of the hardest hit by the recent devastating floods, so this will be a welcome relief.

A 0.5% increase in Insurance Premium Tax will provide the extra funding for the defences.

For more information

More from our agriculture experts

You can find all of our latest agriculture sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Martin Wilmott is a partner at Hawsons

Martin Wilmott acts as lead engagement partner for a wide range of corporate and non-corporate clients in the Doncaster office, especially in the Legal and professional, agricultural, transport, property and construction, manufacturing, healthcare and hospitality sectors. For more information or advice on anything covered in this article please contact Martin on [email protected] or 01302 367 262.