The recently announced National Living Wage of £7.20 per hour is expected to hit farming businesses hard. The launch of the new wage, which is replacing the National Minimum Wage, was announced in the Chancellor’s budget and represents a jump of 11% from the current £6.50 an hour. The amount is set to rise to £9 per hour by 2020 for employees aged over 24.
For many companies, a reduction in corporation tax will help to offset the rise, but this applies to fewer than 10% of farming businesses. Henry Robinson, president of CLA which represents many rural landowners, said “As a result of this budget, farmers and other rural businesses are presented with significant inflation in wage costs and the cut in corporation tax that is supposed to pay for it will not benefit them… There are hundreds of thousands of family businesses in rural England and Wales that are unincorporated and therefore are taxed on higher tax rates.”
However, the new Inheritance Tax Relief rules look to benefit many farming families, as the Chancellor announced the creation of a £175,000 family home allowance for each individual. While many farming properties qualify for agricultural property relief from inheritance tax, claims are very closely scrutinised by HMRC and the new allowance will help some farming families. The new allowance is transferable between spouses and there will be an ability to also take advantage of the new allowance even if you downsize.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.
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