Running a farming or rural business comes with its unique opportunities and challenges, and staying informed on financial and tax matters is crucial for long-term success. In this edition, we’re focusing on the updates and insights that matter most to rural enterprises.
The recent budget announcements bring important considerations for the sector. From funding the cost of employment, planning for the proposed IHT measures and changes to the support for agriculture, we’ll provide a clear breakdown of the key takeaways and how they might impact your operations.
We’re taking a closer look at inheritance tax—a vital topic for those planning the future of their farms. Changes to reliefs will have significant implications for succession planning, and understanding these nuances is essential to safeguarding your legacy. In the background, since the budget, we have been working with other firms of accountants across the country to put together our own report on the impact of the proposed measures on our sector. A link to this report is included in this newsletter and will form part of the lobbying for changes to these measures.
Whether you’re seeking strategies to optimise your tax position or insights into how government policies are shaping the agricultural economy, this newsletter is here to help you stay informed and prepared. Thank you for trusting us to keep you updated, and let’s work together to ensure the continued growth and sustainability of the rural economy.
Please note that we will be continuing our run of seminars in the new year following the successful autumn seminars. Please see the dates and venues towards the back of our Newsletter. As our last seminars met capacity very quickly make sure you book your free place as soon as possible.
Whilst writing I would like to congratulate Alice Barclay, Abi Pearce and Jenny Batchelor on passing their final accountancy exams. They have worked very hard to achieve this success and we look forward to seeing what their future brings at Albert Goodman.
Finally, at the start of 2025 we welcomed Abi Kingsbury to Albert Goodman, who has joined us as a Director. We are all pleased that Abi is settling into the team well. If you would like to discuss any matters affecting your rural business please do not hesitate to contact her, or your usual contact in the team.
We hope you find this newsletter useful and as always, please get in touch if you have any comments or questions.
SAM KIRKHAM Partner and Head of Farms & Estates Team
INHERITANCE TAX
- What should you be doing before April 2026?
On 30 October Rachel Reeves announced proposals that will impact family businesses across the country, particularly those businesses intended to be handed down to the next generation to run.
Currently, trading businesses can qualify for up to 100% relief from inheritance tax (IHT) with business property relief (BPR). Further, property occupied for the purposes of agriculture can qualify for up to 100% agricultural property relief (APR). This means most businesses can be handed to the next generation to run, largely without a tax liability. This enables the business to continue in the hands of the next generation, without the need to sell assets, and provides certainty and confidence and therefore the ability to continue to invest in that business for long term growth. Without the reliefs, IHT would be payable on death at 40% on the value of assets in the deceased’s estate.
The measures announced in Rachel Reeves’ Budget mean that from April 2026 the reliefs will be subject to a combined cap of £1M for 100% relief per estate. Value over £1M will only benefit from 50% relief - effectively a 20% tax charge on business and agricultural property values in excess of £1M.
The Chancellor claimed that the £1M allowance would protect a small farm or business. There has been much commentary in the press about what this means. As an example, if we assume a husband and wife own the business, and business assets, jointly, have no other assets outside the business and have tax efficient wills in place, the potential value chargeable to IHT based on the value of the business could be as outlined below:
This suggests a small business on this basis could be worth up to £4M. However, clearly in real life,
CONSIDER THE IMPACT
Over the next few months it is important that all business owners consider the potential impact of the proposed measures and whether the tax is affordable.
As assets qualifying for APR and BPR tend to be illiquid, there is much concern over how the IHT would be funded without a sale of the business or assets used in the business.
There is the option to fund the IHT in instalments over ten years with the first instalment due 6 months after death. Interest is generally charged over the ten-year period, with the interest rate increasing from 6 April 2025 to 8.75% (assuming no Bank of England base rate changes before then).
However, where the IHT relates to certain assets qualifying for APR and BPR, if the instalments are paid on time no interest would be charged. This does not include nonagricultural assets used in the business but held outside the business. Therefore, it is important to consider whether the descendants can meet the deadline for each ten-year instalment and that the ownership and structure of the assets and business can result in no interest charges.
To enable the instalments to be funded on time, without an interest charge, there would need to be sufficient profits generated in the business over the ten-year period. If this is not possible then alternative planning will need to be considered.
HOW CAN THE IHT BE FUNDED?
If the potential IHT cannot be funded over the ten-year period, alternative planning should be considered which might include:
1. Borrowing from the bank over a longer term but with interest chargeable over that term.
2. Funding life insurance which will pay out a sum on death to help fund the IHT.
3. The potential sale of assets if they are not needed for the future of the businesses.
4. Starting the succession plan early through passing assets on to the next generation in lifetime.
STARTING THE SUCCESSION PLAN EARLIER
It remains the case that often gifts of business and agricultural assets can be made in lifetime without any capital gains tax (CGT) or IHT payable. Holdover relief remains available for most trading and agricultural assets to defer CGT on a gift to the recipient of the gifted asset – so they pay the CGT if and when they dispose of it in the future. The asset will also be outside the estate of the person giving it away if they survive seven years from the date of gift and they do not reserve a benefit in the asset, or continue to receive an income from the asset.
The latter point is important – if the person giving away the asset reserves a benefit in it, such as remaining in occupation of a house which they had gifted or by continuing to receive an income from the asset gifted, then those assets would remain chargeable in their estates, even if they survive seven years. Therefore, careful consideration needs to be given to whether there is sufficient income to continue to fund the living requirements from the assets retained after the gift.
Based on the above, business owners need to consider whether they can afford to start the succession plan earlier and, assuming the next generation are ready to receive the assets and take part in running the business, the CGT and IHT planning should be considered.
It should be noted that any gifts made from budget day (30 October 2024) will be subject to anti-forestalling rules such that, if death occurs within seven years of the gift, and after April 2026, the value of the gift comes back into charge under the terms of the proposed new measures. As such, the gift will be subject to the same £1M allowance of the donor. Therefore, it is advisable to consider whether life insurance for the seven year period is affordable to cover such possible eventualities.
KEY ASSETS TO PRIORITISE FOR GIFTING
Where gifting is affordable, there are certain assets which should be considered for gifting earlier rather than later, these include:
1. Assets expected to increase in value
If there are assets expected to increase in value, such as a barn which could obtain planning for conversion, potential development land or land with an option for lease for solar, if the income and capital value is not required from these assets, considering gifting them sooner rather than later is advisable. This is because, whilst the assets are used in a trading or agricultural business, CGT holdover relief should be available. Once that use has changed, holdover relief may no longer be available. Further, if the assets are gifted and death occurs in seven years, it is the value at the date of gift which comes back into charge, not the value at the date of death, which may be significantly higher.
2. Furnished holiday lets
Please see Kate Hardy’s article regarding the abolition of the furnished holiday let (FHL) rules from April 2025. Currently, FHL’s qualify for CGT holdover relief. Once the rules have been abolished they no longer will, therefore there is a window of opportunity before April 2025 to make gifts of FHL if the income and capital is not required in the future.
TRUSTS
Trusts will also be caught by the new IHT regime from April 2026. Ruth Powell summarises the potential new rules and the planning to consider in her article What the Autumn Budget 2024 means for UK trusts.
WILL PLANNING
The draft proposed measures confirm that the £1M allowance is not transferable between spouses. Therefore, it is important that business owners consider the ownership of the business and business assets as well as their wills and partnership agreements to ensure maximum use is made of the £1M allowance. However, it is important to take advice to ensure that the existing reliefs continue and that where assets are transferred between spouses there is no gap in relief. For example, if all the assets are in one spouse’s name but both spouses are in business together, if half are transferred to the other spouse, that spouse may not qualify for any relief for two years.
DEATH BED PLANNING
It may be the case that there has been a death in the last two years and the estate of the deceased included agricultural or business assets. If those assets passed to the surviving spouse, it may be advisable to consider whether a deed of variation should be done to bank the existing reliefs under the current rules, rather than risk IHT payable under the proposed measures, if death of the surviving spouse occurs after April 2026.
CONTINUED LOBBYING
Between now and April 2026, membership organisations will continue to lobby on behalf of business and land owners so that government understand the impact of these measures on family businesses and the economy. As a firm we are doing the same. Please see our report to government https:// albertgoodman.co.uk/assets/uploads/documents/AlbertGoodman-RAG-Report-Final.pdf
Whilst this lobbying continues, and until we have draft legislation, we will not know the true impact of these measures. Therefore, we recommend that each business owner considers their own potential IHT liability, based on the proposals, and how the business might fund the liability as well as the options available to plan for the measures. Once we have draft legislation, families should be in a position to take action over the next year through joined up advice from their accountant, solicitor and land agent.
SAM KIRKHAM Farms & Estates Team sam.kirkham@albertgoodman.co.uk
WELCOME ABI KINGSBURY
Abi joined the team as a Director at the beginning of 2025. Abi has over 8 years’ experience within a Top 10 Accountancy and Tax practice specialising in landed estates, high net worth families and their rural businesses. She is a chartered tax adviser and chartered accountant, having worked in practice for over 13 years, she has a varied advisory background to draw upon.
Abi is happy advising private clients and family-owned businesses on succession planning, capital taxes planning, navigating stamp duty land tax issues alongside income tax planning and compliance. She is experienced in dealing with a broad spectrum of structures from sole traders, partnerships and companies through to trusts and family investment companies, alongside the wider AG team.
Abi is from a farming background, the youngest of a first-generation pedigree Holstein dairy farmer, lately commercial beef and sheep. Abi lives on the family farm near Sherborne with her husband and two young children, all of which keeps her very busy outside of work.
FURNISHED HOLIDAY LETSA WINDOW OF OPPORTUNITY
While the restriction of inheritance tax reliefs might by closing some doors, there are some windows of opportunity for furnished holiday let (FHL) businesses.
Although not taking the current headlines, FHLs have managed to appear throughout our Newsletters this year – from the initial announcement in the Spring budget that the FHL regime is to be abolished from April 2025 to the landing of the draft legislation in the summer.
While I now want to bring you up to speed on HMRC’s recent clarification, I am also banging the FHL drum, as I don’t want you to miss some potential windows of opportunity before the rules change.
So, let’s start with some of the clarification.
For VAT purposes, there is no change. HMRC have confirmed that FHLs will continue to be standard rated for VAT purposes.
For income tax purposes, from 6 April 2025 you will no longer be able to claim capital allowances on fixtures, fittings and furnishings in the property. Instead, you can claim ‘replacement of domestic items relief’, providing relief on the replacement, but not the initial purchase of like for like capital items.
The good news here is that where capital expenditure has been incurred and has created a capital allowance pool pre1 April for corporation tax purposes and before 6 April for income tax purposes, allowances can be claimed on that pool until it has been used in full.
In addition, any FHL loss will be treated as a property business loss going forward and can be offset against other property income. It’s therefore important to ensure you’ve ‘banked’ these capital allowances before the rules change.
When a FHL commences, it must meet the qualifying criteria, including an occupancy period of 105 days in the first 12 months from the date of commencement. HMRC have clarified that, where the FHL business commences in
the 2024/2025 tax year, the occupancy conditions will begin on the first day of let and may extend beyond 5 April 2025, albeit the FHL will only be treated as a FHL up to 5 April 2025. This means that if the property business qualifies as a FHL business, it can ‘bank’ the capital allowances that would otherwise be lost.
So, that’s the start of the business, let’s now move forward to cessation…
While the FHL regime is being abolished from April 2025, this does not automatically mean the FHL business ceases on that date – it merely means the FHL tax regime no longer applies.
The property business will therefore be treated as continuing unless the business actually ceases. This is vital if you wish to rely on business asset disposal relief (BADR) for CGT purposes, which is available for three years after cessation. However, this is a very complex area so if you are considering claiming BADR, please do ensure you obtain professional advice.
With IHT reliefs taking the headlines, there is currently a lot of discussion around gifting assets to the next generation. As you will have read in Sam’s article, while agricultural property may be gifted in lifetime with no immediate tax charge, gifting residential property can incur a hefty CGT charge, without using trusts. However, if the property qualifies as a FHL, there is a window of opportunity until the rules change in April 2025, for the property to be gifted with a holdover election, which means no immediate CGT charge.
If you’d like to discuss this or any of the topics in our Newsletter, please do get in touch.
KATE HARDY Farms & Estates Team kate.hardy@albertgoodman.co.uk
Impact of IHT changes for tenant farmers
KATE BELL
Farms & Estates Team kate.bell@albertgoodman.co.uk
Following on from Sam’s article, this article considers the impact of the new rules on tenant farmers, a sector close to my heart being tenant farmers at home. Inheritance tax is not just a tax for those owning land, it also impacts tenant farmers and farmers who are very heavily borrowed on land purchases.
Business property relief (BPR) was capped as well as agricultural property relief (APR), meaning that whether it is agricultural land or property, or assets within your business, they are within the £1M APR/BPR limit per person.
Many may not deem themselves particularly wealthy but when you value all the following assets at open market value, you soon exceed £1M, before considering the value of property or the tenancy, even if they are net of debt or hire purchase agreements etc.
So, what should you do? Well, try not to panic.
Livestock
All herds/flocks and youngstock (regardless of herd basis status for income tax purposes)
Deadstock
Arable stocks in store such as barley or wheat
Feed, fertiliser, straw and fuel in stock
Tillages
Crops in the ground
Plant and machinery
Tractors, trailers, implements, milking parlours and solar panels etc.
Tenant improvements
Sheds, slurry or silage improvements that may be paid under the tenancy as tenants’ compensation
Tenancies with remaining successions
The value of the tenancies held, especially if there are succession rights.
Investments
Genus shares
Arla capital accounts
Grain store investments
Cash balances
Even if earmarked for potential future purchases or investments
Other potential assets may include
Rental property
Investments or savings
Pensions from April 2027
For many, there will be several family members within the partnership so this potential liability may be shared, but it is certainly worth understanding - especially if you have tried to add to your farming enterprise with improvements, a rental property or a few acres.
We do not have the draft legislation yet but there is still the option of gifting assets between the family during lifetime, potentially tax free. Perhaps it is also a good time to speak to a specialist tenancy succession adviser, to consider the succession in lifetime which may remove what could currently be substantial value in investments in slurry or silage infrastructure.
Consider the value of the stocks you hold together with other assets and speak with your accountant to understand the impact of the proposed measures and the options available. However, tax should not always be the driver and you should make decisions based on what is right for you, the business and your family. Tax planning areas we are currently discussing with our clients are:
Making gifts in lifetime
bringing others into the business (new partners)
incorporating the business
use of trusts
or just go out and enjoy your savings!
When you read this, I should be out of the business to welcome our second child into the world. I will be returning for May but my colleagues will be more than happy to assist in the meantime.
A SUMMARY OF 2024 FINANCIAL RESULTS AND THE FUTURE CHALLENGES FOR THE FARMING INDUSTRY
Dairy
It’s no surprise that dairy farm profitability for 2024 has overall been lower than the previous year. Average milk price has seen an approximate reduction of 16% (8-10ppl) on the previous year, whilst at the same time input costs have remained volatile. Key costs such as feed, fuel and fertiliser reduced from the high prices of spring/summer 2023, however, the reduction was far outweighed by the milk price reduction, resulting in lower margins.
Milk price is now on the rise again so it will be interesting to see what 2025 has to offer. Slurry storage and management, potential legislation changes and the ability to manage input costs will be some of the key challenges facing dairy farmers in the future.
Beef
The UK and global demand for beef remains strong, with the 2023/24 year seeing some of the highest £/KG prices to date. The high output prices have been matched with high input prices resulting in no major changes in beef cattle gross margins overall. The UK suckler herd numbers are declining, with increasing levels of beef originating from dairy systems. However, this supply may be more limited in future with declining dairy cow numbers predicted. Despite the high market prices and strong demand, the increasing costs of beef production present concerns over future profitability.
Lamb prices per KG for the first 2 quarters of 2024 were some of the highest ever seen, which has resulted in an overall strong year for sheep farmers in terms of sales. Gross margins remained comparable to the previous year as the spike in lamb prices was followed by strong markets for store lambs and replacement ewes. The total UK breeding ewe flock numbers may be lower this season, as farmers took advantage of the high meat prices, with ewe lambs being sold to slaughter instead of kept for breeding. There is no suggestion of declining demand, meaning the strong prices in the sheep market may be here to stay for 2025.
Poultry
Both broiler and egg producers have experienced strengthening markets and increased prices compared to previous years. Supermarket and consumer buying habits are shifting towards higher welfare options, with free range egg production increasing each quarter since the spring of 2023, along with free range egg prices also increasing. Broiler production has seen similar trends with many supermarkets pledging to support higher welfare options. It’s likely UK demand for the poultry industry will continue to increase. The investment in poultry buildings is significant and planning may be a key challenge for any producers wanting to expand.
Sheep
Changes to BPS Payments
2023 was the last year of the Basic Payment Scheme with 2024-2027 being transition years with farmers instead receiving de-linked payments. Hidden within the latest budget announced by the Labour party was more rapid phasing out of the de-linked payments for this period. For 2025, a 76% reduction will be applied to the first £30,000, while a 100% reduction will be applied to any amount over the first £30,000. This essentially means that BPS will be capped at £7,200 for all farmers (a 76% reduction on £30,000). This needs consideration when planning for future cashflows.
Countryside Stewardship and SFI options may be attractive alternatives.
Capital Grants
Capital grant applications for 2024 have now been closed by DEFRA and there is uncertainty about what will be available in 2025. Applications that have been submitted but no offer made by DEFRA are currently on hold. DEFRA have made it clear their future policies will be in line with prioritising food security and nature conservation.
Carbon Tax on Fertiliser
As with many other farm costs, fertiliser prices have been extremely volatile and are likely to remain this way.
From 1 January 2027, the government plans to introduce a tax on imported fertiliser products with the aim of reducing overseas carbon emissions, which industry sources have suggested could increase the price of fertiliser by £50/t. Farmers need to continue to consider the need to absorb these additional costs against potential alternative options, such as improved use of natural fertilisers.
In summary and as always, there are a lot of changes ahead so planning and managing your cashflow will continue to be an important part of running a successful farming operation.
lindsey.johnson@albertgoodman.co.uk
LINDSEY JOHNSON Farms & Estates Team
ECONOMY ROUND UP
The state of the UK economy has shifted significantly over the last twelve months. The new labour government has now laid out its plans for growth and balancing the books.
The likely impact of the budget on inflation and interest rates would appear to be quite negative. The growth of the UK economy is also predicted to stagnate further.
There continues to be strong outside factors affecting inflation. These outside factors could be more turbulent now Trump is returning to power in the US.
INFLATION
Following the last budget, inflation is predicted to be higher than the last forecast in March. This is due to the agreed public sector pay rises, minimum wage increases, and an increase in employer national insurance from April 2025.
Inflation is now predicted to be an average of 2.6% for 2025, 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2% in 2029. This means inflation will be above the 2% target for most of the next four years.
The impact for farming businesses will be more inflation on costs than predicted, and there could also be a squeeze on farm receipts due to the cost-of-living crisis continuing for longer.
INTEREST RATES
The current bank of England base rate is 4.75%. In the last monetary policy committee (MPC) meeting the committee voted to hold interest rates in a 6-3 voting split.
With inflation now predicted to be above the 2% target for longer, the bank of England has said that future interest rate cuts may not come as often and as quickly as previously thought.
The next MPC meeting is in February and whilst the 6-3 split from the last vote in December indicates that a cut could come in February, it is likely that for the short to medium term we should get used to a base rate above 4%.
The impact for farming business is that their variable rate debt will remain higher for longer. This will put more pressure on cashflow.
SUMMARY
Whilst the main impact for farming businesses of the budget is the changes to inheritance tax relief, the impact of the budget on the UK economy will put a further squeeze on cash flow.
TOM STONE Farms & Estates Team tom.stone@albertgoodman.co.uk
PENSIONS UPDATE
Following the recent announcements in the Budget regarding the proposed changes to the taxation of pension funds for Inheritance Tax (IHT) as well as the restrictions introduced to Business Property Relief (BPR) and Agricultural Property Relief (APR), many will now need to be reviewing their pension arrangements more closely.
Historically, those with both chargeable assets for IHT as well as pension savings, have generally chosen to avoid drawing on those funds as they could be passed to the next generation free of tax and as such, spending other resources has always been more efficient IHT planning.
With effect from April 2027 however, it is proposed that pension savings will fall within the remit of IHT with 40% chargeable on funds held at death where the estate exceeds the nil rate bands. The strategy of holding on to these savings to be passed on death should now be reviewed as it is likely that going forwards, drawing on these funds and using the money in other ways could be more tax efficient.
Where the 25% tax free element has not been taken, this could now be considered with the funds generated either spent, gifted away or invested elsewhere – potentially into business assets where some relief may be available. Where cash is gifted away, provided the donor survives 7 years from the date of the gift, it will fall outside the estate for IHT completely. In addition, cash gifts do not attract capital gains tax (CGT). These options are also likely to be more attractive where there is some or all of the basic rate tax band available – paying 20% income tax on drawing the funds (and spending it!) is preferable to paying 40% IHT.
LIZ JONES Farms & Estates Team liz.jones@albertgoodman.co.uk
Those who have their pension funds held as SIPPs will also need to review their position –early indications are that where a SIPP holds land that is being used for agricultural purposes and would therefore otherwise qualify for APR, the £1 million relief at 100% will not apply. As a result, these assets will now potentially become chargeable on death despite consisting of assets that would ordinarily attract relief.
Pensions are also likely to become far more important for those who will now find themselves in the position whereby they will need to consider gifting business assets earlier in life. The restrictions to BPR and APR on death from April 2026 is likely to result in assets being passed to the next generation at a far earlier age to ensure the donor survives 7 years and the assets therefore pass without tax.
Having given away the assets, consideration will then need to be given to funding retirement. If any benefit is retained from the assets gifted – for example, if income is drawn in any way, there would be a ‘gift with reservation of benefit’ and the gift would fail for IHT purposes. To be able to make such gifts, and for those gifts to be effective, thought will need to be given to paying into pension funds at a much younger age to ensure that by the time they are looking to gift away the assets from which they derive an income, they have an alternative income source to take its place.
CHANGES TO DOUBLE CAB PICK-UPS
Following a series of U-turns on the taxation class of Double Cab Pick-ups (DCPU) earlier this year, the chancellor announced in the autumn budget that DCPUs are to be taxed as cars, rather than vans from 1 April 2025 for Corporation Tax and 6 April 2025 for income tax purposes.
Businesses and individuals will be impacted by this change if they claim certain tax reliefs and allowances on these vehicles, with the main changes highlighted below:
CAPITAL ALLOWANCES
Currently, DCPUs are classified as vans. Vans benefit from 100% capital allowances, meaning tax relief is available in full in the year of purchase. If the DCPU is available for private use by a partner or sole trader, the 100% claim in year one is restricted by the percentage of private use.
When DCPUs are reclassified as cars, 100% tax relief upfront on the purchase will not be available. Instead, the allowances available are based on the vehicle’s CO2 emissions and unless we’re dealing with a very low emission, zero emission or electric vehicle, the capital allowance claim will be 6% per annum on a reducing balance basis, restricted for any private use.
This change means it will take far longer to receive the tax relief on the purchase.
BENEFIT IN KIND (BIK)
Where an employee (including a director) is supplied with a DCPU and the vehicle is available for personal use, this can give rise to a benefit in kind (BIK). A BIK is treated as additional taxable income for the employee and the employer is required to pay additional national insurance (NI) on this benefit - currently 13.8%, increasing to 15% from April 2025.
At present, DCPUs are classified as vans. Firstly, this means there is not a taxable benefit if the private use incurred by the employee is insignificant. Secondly, if there is private use, vans currently have a fixed taxable value for BIK purposes, which in 2024/25 is £3,960.
In April 2025, as the DCPU will be reclassified as a car, any level of private use (or by just being available for private use) will mean the vehicle becomes a taxable benefit.
BIK rates for cars are considerably higher than vans. The BIK it is based on the vehicles list price (not second-hand value) and the cars CO2 emissions. Most DCPUs attract the highest CO2 emission rate of 37%.
A DCPU with a list price of £40,000, with CO2 emissions of 230g/km, will have a taxable value of £14,800 in 2024/25. This is a considerable increase compared to £3,960 as a van. The employee will pay income tax on this benefit based on their own income tax bracket and the employer will be liable to employers NI (soon to be 15%) on the taxable value.
There are also additional charges for the provision of private fuel.
The good news is, there are some transitional rules. If the DCPU is purchased before April 2025, the current BIK treatment will be in place until the earlier of disposal, lease expiry or 5 April 2029.
VAT
Although the income tax and corporation tax rules are changing for DCPUs, the VAT rules are not. Whether VAT can be reclaimed or not is determined by the payload of the vehicle. If the payload is over 1 tonne, VAT can be reclaimed on the vehicle. However, private use should be considered.
Caution needs to be taken where a hardtop is fitted to a DCPU as this can reduce the payload to under 1 tonne, resulting in the VAT becoming unclaimable.
WHAT CAN YOU DO?
Businesses which heavily rely on DCPUs will feel a significant impact by these changes. Considerations should be to:
1. Look at alternatives, such as single cab pickups, 2-seater vans, low emission/electric alternatives
2. Purchase/renew the lease and/or order a double cab pick-up before April 2025
3. Limit private use to business use only. Pool cars which are strictly business use and stay on business premises overnight, receive more favourable tax allowances.
If you would like to talk through how the changes impact you, please do get in touch.
ROSIE TURNER Farms & Estates Team rosie.turner@albertgoodman.co.uk
ESTATE DAYS ROUND UP
During November, we held workshops focusing on Accounting for Estates, each held over 2 days. This involved 16 experts from 7 specialisms across Albert Goodman, and attendees ranged from finance directors to bookkeepers, land agents, and consultants.
Highlights Day 1
Our first day kicked off at a very strategic level. Here are the highlights from the day:
CAPITAL TAXES
This session covered various capital taxes such as capital gains tax (CGT), stamp duty land tax (SDLT), and the very topical Inheritance Tax (IHT). Following Rachel Reeves’ first Labour budget, Sam Kirkham explained the potential impact of the proposed changes to business property relief (BPR) and agricultural property relief (APR) on Estates. As expected, the impact was significant, raising concerns about how Estates would fund such liabilities. Key takeaways included assessing the impact, considering options, such as early succession planning, life insurance, and utilising heritage reliefs.
MANAGEMENT INFORMATION SYSTEMS
After a tax-focused morning, we welcomed Dave Eva from our management information systems (MIS) team. Dave demonstrated how Power BI, Excel Power Query, and Power Pivot can automate and streamline internal systems, processes, and functions to provide meaningful data for decision-makers within the Estate. It is amazing what technology can do when you know how!
FINANCING
To round up the day, Tom Stone from our Farms & Estates team discussed the different types of financing available to Estates, what lenders are looking for, and considerations when seeking finance for large projects. Planning for this is key!
Highlights Day 2
Our second day took a deeper dive into areas of consideration for Landed Estates. Here’s a recap:
BOOKKEEPING AND ACCOUNTING ADJUSTMENTS
We began the day at the source records, working through accounting and tax adjustments to arrive at the taxable profit, sharing some Xero top tips along the way.
We discussed different capital allowances, providing an understanding of the allowances available on capital expenditure commonly seen across Estates, and considerations for large projects.
FORGOTTEN TAXES
Our experts highlighted important areas and potential pitfalls in the following areas:
Associated companies and corporate structures
Benefits in Kind
Annual Tax on Enveloped Dwellings and the available reliefs
Registration of Trusts and those that are not obvious Trusts.
These topics come with various tax implications, which sparked several broader discussions in the room.
VAT INSIGHTS
Richard Taylor, one of our VAT experts, covered a vast amount, starting with Partial Exemption and detailing what should and shouldn’t be included in these calculations.
He also provided insights on the capital goods scheme, options to tax, expenditure with private use, and the treatment of motor and property expenses.
Day two was packed with insightful discussions and practical tips to deepen our understanding of these critical topics.
We really enjoyed seeing everyone at the workshops, meeting new people and catching up with our existing estate clients. We look forward to hearing your feedback from those who attended.
If you did not have the opportunity to attend these workshops and would like to be kept up to date with future events, then please do get in touch with anyone in the team.
SARAH LEMON
Farms & Estates Team sarah.lemon@albertgoodman.co.uk
GRACE POPHAM
Farms & Estates Team
grace.popham@albertgoodman.co.uk
TAX YEAR END PLANNING –CHANGES TO REMUNERATION
While the budget is supposed to be a budget for growth, the extra tax on employment may affect the ability for an employer to invest in the business which therefore could prevent growth. This article considers remuneration planning following these changes, rather than the general affect across the wider business sector.
It has been traditional practice of owner managed businesses, run as companies, for directors to take a small wage and a larger dividend (to utilise their basic rate band for income tax purposes) to both remunerate the owner-manager tax efficiently and to claim a qualifying year for state pension purposes.
The changes in the budget both increases the employer’s NI (to 15%) and decreases the limit from which you start paying NI.
Where the director’s tax efficient salary was set at £9,100 for 2024/25, if the salary remains the same for next year, there will now be a £615 year NI charge for the company. This is on the basis the employment allowance (EA) was not available. Unfortunately, it is no longer possible to reduce the salary so that no NI is due and for it to be a qualifying year for state pension purposes.
While the EA has increased, which could reduce the overall liability, a sole director cannot claim the EA. Further, should wages be paid of more that £70,000, the business may not have the EA available to offset the additional cost.
Therefore, we need to consider the other remuneration options, which are not subject to NI – these being rent and interest.
The following example provides a total remuneration of £50,270 to utilise the directors basic rate band, comparing the previously traditional remuneration package of salary and dividends with a mix of salary, dividends and rent as follows:
1. A salary of £9,100 and dividends of £41,170, compared to:
2. A salary of £6,500, to claim a qualifying state pension year, interest of £15,000 and rent of £28,770.
In each case, company profits are £200,000 before remuneration and there is no EA available.
This shows that the salary and dividend option is not the most tax efficient, which it hasn’t been for several years, but the change in NI has further emphasised this.
However, not everyone will be able to utilise the interest and rent option and each remuneration scenario now therefore needs to be individually tailored.
To illustrate this, let’s take the example of husband and wife tenant farmers in a limited company. They have no other employees, so the full EA is accessible.
On the basis there is no option available to charge rent and interest, let’s compare the traditional remuneration method of a low salary of £9,100 and a high dividend, with a salary of £40,000 each and low dividends:
While certain options can give substantial tax savings, I should note that the cash flow will change for the different options. For example, with a high salary, PAYE tax will be payable by 19 April – if paid in March, whereas tax on dividends, interest and rent is not payable until the following 31 January. If the cash can be put to better use, then this could outweigh the tax saving.
If you would like to discuss the options or are concerned that you may not be remunerated most tax efficiently, please do get in touch.
This shows that every scenario is different, as the number of directors, or family members who work for the company can change the outcome. Care should be taken, but with the changes in NI, if family members are doing some work on the farm, it may become more tax efficient to employ them.
SPRING SEMINARS INVITATION
Albert Goodman are delighted to invite you to our spring seminars discussing proposed IHT changes and other tax planning opportunities.
