Responding to the news that the Annual Investment Allowance extension (AIA) will continue to be extended to £1m to 31 March 2023, Jonathan Armitage, Head of Farming for Strutt & Parker, says:

“This is good news for farming businesses given they are currently facing a number of difficult challenges – including rising input costs, labour shortages and significant changes in agricultural and environmental policy. 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.”

Responding to the budget in general, he says: “Changes to business rates in the leisure and hospitality sector may also be helpful to rural businesses with diversified enterprises. However, 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.”

NFU President Minette Batters said: “Agriculture is not immune from the inflationary pressures hitting all parts of the economy; British farmers and growers are currently facing huge challenges from increased feed, fertiliser and energy costs, alongside a crippling shortage of workers.

“UK farm businesses, and their diversified enterprises, will welcome the Chancellor’s announcement today to extend the temporary increase in annual investment allowance for plant and machinery to March 2023. This will help support critical investment in British farming businesses. However, we now need to see a longer-term roadmap for capital allowances from 2023, one which incentivises all forms of capital investment including infrastructure.

“It was disappointing not to hear anything from the Chancellor on government plans to develop its export strategy to help UK farmers grow their markets overseas, including funding for dedicated agricultural counsellors, or any details on overhauling government procurement practices to increase the provision of fresh and nutritious British food in our schools, hospitals and other public sites.

“And equally the lack of focus on net zero funding, especially with COP26 only days away was a missed opportunity. However, the Chancellor did announce that businesses will benefit from business rates investment relief for green technologies, which is a positive move to support continued investment in renewable energy and may help in UK farming’s ambition to achieve net zero by 2040. We will now need to see more detail to be certain about the impacts this will deliver on farm.

“More encouraging was the new 50% business rates discount for companies in the retail, hospitality, and leisure sectors, lasting for one year, which will support rural businesses such as farm shops recovering from the impact of Covid-19. There was also good news for our members who produce world leading sparkling wines with a reform of the alcohol duty system, ending the 28% duty premium, as well as a rate cut for our world leading hop and fruit cider producers.

“As we have already highlighted to the Chancellor, future farming schemes have the potential to deliver meaningful, widespread and long-term benefits for Britain. It was therefore positive to hear that Rishi Sunak will provide Defra with much needed additional resources and funding to deliver its plans to support the essential transition to a new agriculture policy. 

“The NFU’s Levelling up report highlights how investment in British farming and rural Britain can bring huge benefits to the entire nation; delivering jobs, green growth, exports and improved health and wellbeing. Farm businesses have a key role in the government’s investment-led recovery. With an ambition to reach net zero by 2040, British farming can be a pivotal part of meeting our climate ambitions and increasing the production of sustainable climate-friendly food.”

Today’s Budget offered few specific measures to help the farming sector through the toughest challenges it has faced for decades, says leading rural insurer NFU Mutual.

Despite facing huge pressures as the Basic Payment Scheme is phased out, agriculture missed out on specific measures in the Chancellor’s Budget. However, there were some announcements that may help out certain sectors.

Chris Walsh, Farm Specialist at NFU Mutual, said: “On the face of it, there wasn't much in the Chancellor's Budget for farmers, but there was support for the rural drinks industry, growers, and rural hospitality industry.

"The end of the premium duty on sparkling wine will be a boost for the UK's growing wine sector and lower duty on draught beer and cider could help on-farm drinks manufacturers and potentially benefit growers of barley, hops and apples.  

“Farmers investing in their businesses’ plant and machinery may be able to benefit from the extension of their Annual Investment Allowance, which was due to end on the 1st January 2022 but has now been extended until 2023.

"Farmers planning to diversify could be encouraged to take the plunge by the one-year 50 per cent business rates discount for retail, hospitality and leisure sectors - but smaller farms may be better off using the already-available Small Business Rates Relief. 

"There was also further incentives for farmers to invest in green property improvements, with the new Green Investment Relief encouraging businesses to adopt green tech like solar panels."

Lack of tax changes

After tax hikes to dividends and National Insurance Contributions were announced in September, there were no major tax changes that would affect farmers announced in the Budget. 

Sean McCann, Chartered Financial Planner at NFU Mutual, explained: “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.”