Calls for Chancellor to take farmer futures into account with Spring Budget

To raise extra tax without being seen to increase headline tax rates, the Government has pledged to keep the thresholds at which people pay tax fixed until 2028 instead of uprating them with inflation.

With inflation nearing 10 per cent, this means that many farming families' spending power is falling because any extra income they receive often results in them being caught in a tax trap.

The same policy means more families are being forced to repay or opt out of child benefit as wages increase to keep up with inflation.

Farming families' ability to pass assets down to the next generation is also being threatened by tax-free allowances on Inheritance Tax being frozen.

Although Agricultural Property Relief and Business Property Relief can help reduce or eliminate inheritance tax on qualifying farms and business assets, more farming families could be faced with inheritance tax bills on other assets such as let residential property, investments and personal belongings.

Sean McCann, Chartered Financial Planner at NFU Mutual, said: “Rising incomes and asset prices mean more and more farmers are being drawn into 40 per cent and 45 per cent Income tax rates, the Child Benefit tax charge, and Inheritance Tax.

“Thawing some of these frozen thresholds in the Spring Budget by uprating them in line with inflation will help many, including farmers, deal with rising bills.

“Inheritance tax is unnecessarily complicated and ripe for reform. Getting rid of the myriad of gifting allowances in favour of one annual gifting allowance of £15,000 would help simplify the tax for the increasing number of families who fear being caught by inheritance tax.

“It’s important that any changes do not impact Agricultural Property Relief and Business Property Relief, which are vital in ensuring that family farms can be passed on intact.”

He also called for the amount people can invest in a pension without attracting a tax penalty to be increased to help farmers plan ahead for retirement and avoid being a financial burden on younger generations.

It was also suggested that deferring the planned 5p rise in fuel duty and maintaining the current energy price guarantee for households would also help farmers.

NFU Mutual Farm Specialist Chris Walsh added: “While red diesel is commonly used for agricultural work, farmers also use white diesel and petrol for transporting livestock and produce around the countryside.

“Energy bills are also proving costly, especially for energy intensive sectors such as horticulture so we support calls from the farming unions to extend the Energy and Trade Intensive Industries (ETII) scheme to include horticultural and poultry production.

Chancellor Jeremy Hunt’s Spring Budget takes place on March 15.