Sunak budget delivers tax incentive to invest

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Chancellor Rishi Sunak’s Budget, delivered today, included a tax allowance that could incentivise investment  over the next two years.

The Chancellor announced a new ‘super-deduction’ for companies investing in new plant or machinery assets. Companies investing in qualifying plant and machinery between April 1, 2021, and March 31, 2023, will get a 130% first year capital allowance,

This will them to cut their tax bill by up to £25 for every £100 spent and will make it much more attractive for farm businesses to invest, said Rebecca Davidson, rural affairs specialist at NFU Mutual.

Other budget highlights included:

  • An extension of the furlough support scheme to September 2021 across the UK.
  • Extension of the apprenticeship hiring incentive in England to September 2021 and an increase of payment to £3,000.
  • Maintaining the income tax Personal Allowance and higher rate threshold from April 2022 until April 2026.
  • The rate of Corporation Tax will increase to 25% but 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.
  • Fuel duty will be frozen for the 11th consecutive year.
  • Agriculture will be exempt from new red diesel restrictions.
  • £4 million 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.

Ms Davidson added:  “How far Sunak’s fiscal firepower will be felt by farmers will be in the detail but there’s good news for environmental schemes as farmers play their role in achieving net zero.

She said: “We also hope that the drive to encourage apprenticeships will assist farmers to grow talent in their businesses and provide opportunities for new entrants to start a career in agriculture. The government-guaranteed mortgages may also help younger generations who struggle to find affordable housing to remain in rural areas.

“As always, the details of the new measures rather than the headlines will determine if the big announcements on support can deliver for rural areas.”

Sean McCann, Chartered Financial Planner at NFU Mutual, added: “This Budget still had some of Sunak’s softeners – such as the stamp duty holiday and furlough extension. But it also included an explanation on how to pay for it all.

“Personal allowances and income tax bands together with national insurance contributions will be increased from April but will then be frozen until 2026. Inheritance tax and Capital Gains Tax exemptions will be frozen at current levels for the next five years – which means the Chancellor is letting inflation do his job for him.

“As wages naturally increase over time, this would mean more tax collected, so it’s really important people take advantage of their reliefs available to them.

“Sunak’s big hike in Corporation Tax to 25% from 2023 will hit large farms with profits over £250,000 a year trading as limited companies, and the changes will start to have an impact on those with profits over £50,000 a year.

“Farming companies will be wary of this rise in Corporation Tax coming down the line during the transition period from the EU’s Basic Payment Scheme.”

Mark Bridgeman, president of the Country Land & Business Association, said: “The extension of the 5% VAT rate is a lifeline for many small tourism and hospitality businesses who have faced crippling consequences of the Covid-19 pandemic.

“It will allow tens of thousands of businesses breathing space to begin their recovery in 2021, further boosted by hopes of a bumper summer season as lockdown restrictions are eased further.

“But the extension is a short-term crisis response. Government should now begin thinking of how the UK’s tourism and hospitality sectors can thrive in the long term. If we are to compete with other major tourism destinations in Europe – all of whom have VAT rates far below 20% – the UK’s VAT rate should remain at 5% permanently.

“We estimate this move would add £4.5bn to the national economy, leading to more demand, more investment and more good jobs being created.”

“The past 12 months has led to huge changes in the performance of many rural businesses especially in the leisure, hospitality and tourism sectors, with reduced turnover combined with extra costs of sanitisation. Therefore, an extension of the Business Rates holiday until the end of June is welcome news for the sector and is something the CLA has been lobbying intensively for.”

Tim Jones, Head of Rural at Carter Jonas, said: “Farm and estate businesses will welcome the Chancellor’s decision to freeze Capital Gains Tax and Inheritance Tax at their current levels until 2026.

“Businesses will now have more confidence to make those decisions, and it will be a catalyst for some to set plans in motion.

“The suspension of Stamp Duty has been a driver for both buyers and sellers, so a temporary extension until the end of June will be welcomed by those in the process of completing sales and purchases.”

Food and Drink Federation chief Executive, Ian Wright CBE, said food and drink manufacturers will welcome the Budget.

“The Chancellor’s announcement struck the right balance between supporting recovery and acknowledging the difficult choices that have to be made to restore the country’s finances. Food and drink businesses supplying the hospitality and food service sectors will welcome the extension of the furlough scheme. However, we have concerns that support tapers too soon and should be kept under review,” he said.

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