Budget 2021: What are the key themes affecting agriculture?

Friday, 5 March 2021

On Wednesday (3rd March) Rishi Sunak announced the Budget 2021. With this brings an insight into what the economic recovery might look like in the years following the Covid-19 pandemic. Importantly it also provides crucial information that will impact farming business around the country.

Many of the announcements in the budget from a farming perspective will only apply to farms that are structured as a corporation, such as a limited company, as well as farms that have diversification enterprises in the hospitality and leisure sectors.

However there are broader measures that will be welcome news across the agricultural industry – there are no planned changes to inheritance tax (IHT) or capital gains tax (CGT) rate or exemptions, two things that were rumoured to be in line for a bit of a shakeup in order to help shore up the public finances. Fuel duty will also be frozen for another year. Another key feature that may impact a wide variety of farming businesses is the decision to extend the apprenticeship hiring incentive in England to September 2021 and also double the payment. This now means that any employer that hires an apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 from the government. This is on top of the £1,000 payment already provided for new apprentices aged 16 to 18 and those under 25 with an Education, Health and Care Plan, meaning that some employers could receive £4,000 in total.

Other key standouts for agriculture are:

  • A new ‘Super Deduction.’ A brand new scheme available between 2021 and 2023 that allows companies investing in qualifying new plant and machinery assets will benefit from a 130 % first-year capital allowance. Investing companies will also benefit from a 50% first-year allowance for qualifying special rate assets
  • To support the cash flow of businesses, the government is extending the loss carry back rules. Broadly speaking, the current rules allow trading losses to be carried back one year without restriction. For accounting periods ending between 1 April 2020 and 31 March 2022, this will be extended to three years, with losses required to be set against profits of most recent years first before carry back to earlier years
  • The rate of Corporation Tax will increase to 25%, but the increase will not take effect until 2023. Businesses with profits of £50,000 or less, will continue to be taxed at 19% and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate
  • £4 million designated for a biomass feedstocks programme in the UK to identify ways to increase the production of green energy crops and forest products that can be used for energy

For agricultural diversification businesses:

  • Extension to the VAT cut to 5% for hospitality, accommodation and attractions across the UK until the end of September, followed by a 12.5% rate for a further six months until 31 March 2022
  • The government will continue to provide eligible retail, hospitality and leisure properties in England with 100% business rates relief from 1 April 2021 to 30 June 2021. This will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022
  • £5 billion for new Restart Grants – a one off cash grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England.

Tom Forshaw

Senior Analyst - Policy
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