Budget 2018 - Summary and potential impacts for rural businesses
Philip Hammond delivered his Autumn 2018 budget, the last before Brexit.
It would seem there is some good news for those looking at significantly investing in their farm business. From the 1st January 2019, the Annual Investment Allowance (AIA) is being increased five times from £200,000 to £1,000,000 for a period of two years. This means expenditure on say plant and machinery and some fixtures and fittings up to the new limit can be offset against the income of the business in the year that expenditure is made.
Continuing on the theme of capital allowances, the Chancellor also announced a new Structures & Buildings Allowance (SBA) for non-residential structures such as grain stores, factories or commercial units. The aim of this allowance is for business owners to obtain relief for such capital costs by way of a 2% deduction against profits, thereby encouraging the construction of new structures and buildings.
It is also good news for small rural retailers, i.e. farm shops, with all retail premises with a rateable value below £51,000 getting their business rates cut by a third from April 2019 for two years.
Funding allocations were also released including £50 million being set aside to encourage the planting of trees in England under the Woodland Carbon Guarantee Scheme. This is intended to support the planting of around 10 million trees. In addition, the Chancellor announced a significant £200m investment in piloting new solutions to deploy full fibre internet in rural locations. According to the latest NFU survey, 59% of farmers felt the broadband speed they received was insufficient for their business.
Other good news includes fuel duty being frozen, the retention of Entrepreneurs Relief after some speculation it could be abolished and increases to both the Income Tax personal allowance and the Capital Gains Tax allowance for individuals. The amount of income that can be earned before paying tax will increase to £12,500 and the higher rate won’t start until an income of £50,000 is reached.
However, farm businesses with several employees need to prepare for increasing wage bills from April 2019 with increases to both the National Living Wage and the National Minimum Wage. The National Living Wage (NLW) will increase by 4.9%, with the NFU calling it "substantially more" than the sector expected, and comes at a time when farm businesses are faced with a rising cost base.
Also announced in the Budget was a review of wedding-venue laws, potentially removing the restrictions on weddings outdoors and in temporary structures. Currently, the ceremony must be held in a licensed building with a solid, permanent roof. This relaxation of law could prove an issue for rural businesses who have diversified into offering a wedding venue.
New Rural Homes
The Budget continued to progress the government’s commitment to “building more homes in the right places”, and rural communities are likely to see the impact of this drive. The housing infrastructure fund is expected to ‘unlock’ a further 650,000 homes, and a consultation on simplifying the conversion of former commercial properties (which presumably will apply to former agricultural buildings) into new residential properties, is underway. These measures are likely to encourage housebuilding, which will impact the release of rural land.
Whilst there is some good news for farmers from the Autumn 2018 budget, with Brexit soon upon us, the emphasis is on farm businesses to plan and prepare for the future. If there is any aspect of professional work that you require assistance with then please do not hesitate to contact Chandler Watson on 01538 752761 or email email@example.com