Spring Budget – Did Jeremy Hunt do enough to reassure farmers?  

Apr 16, 2024

With an election looming and a change of government looking likely later this year, Jeremy Hunt took to the dispatch box in March to deliver his Spring Budget in a last-ditch attempt to change the Tories’ fortunes.  

In what could be his last budget address, the Chancellor laid out his plans to steer the country out of the economic doldrums. He aims to build a richer and fairer Britain, in a bid to pull off a coup to rival the party’s shock 1992 election victory.  

But what was in it for farmers and rural communities, and did Mr Hunt make any pledges that could reverse the declining support the Tories face in the countryside?  

Ian Parker, director of Whitley Stimpson and agricultural tax specialist, takes a look.  

Extension to Agricultural Property Relief (APR) 

Ian welcomed the provision to extend APR to land entering certain Environmental Land Management scheme from April 2025. This has been a concern for farmers, Ian said, as confusion had existed as to whether accessing this funding would lead to a loss of inheritance tax relief down the line.  

“This is good news for farmers who will be relieved to see this announcement,” he said. “It opens up more opportunities for farmers to choose how to use their land and will put a lot of minds at rest.” 

However, Ian warned this could lead to more productive agricultural land being taken out of food production. 

He said:

“Of course, incentivising farmers to invest in habitat-restoration schemes rather than growing food could have significant impact on food security. It could also see more land sold to non-farming organisations that simply want to access the government funding available, rather than any form of food production. This would be a shame and certainly compromise food security in the UK.”

Tax breaks 

Elsewhere, Ian welcomed the 2% cut in National Insurance contributions, saying it could bring an instant tax benefit to farm workers, sole traders, and partnerships. Slashing Capital Gains Tax (CGT) on residential properties from 28% to 24% could also help wider rural communities, Ian said, as it had been designed to bring more residential property on to the market and encourage the sale of second homes.  

“If this works as intended it will hopefully result in more local homes being available to local people,” Ian said.“But only time will tell if that is the case.”  

Furnished Holiday Lettings 

One area Ian warned could have serious implications for farmers, and the landowners who have diversified into tourism, is the Chancellor’s intention to abolish the Furnished Holiday Lettings (FHL) tax regime.  

Owners of FHL have been able to claim full mortgage interest relief and benefit from capital allowances, but as of April next year, this will be abolished, bringing FHL into line with long-term lettings.  

According to Jeremy Hunt, the aim of the move is to free up more properties for local people on long-term lets. It is expected to generate around £245m in extra tax for the government, which will be used to fund the cut in National Insurance.  

But Ian Parker said the change unfairly impacts on farmers and landowners who have converted disused agricultural buildings into holiday accommodation that wouldn’t be suitable for long-term residential lets.  

He said:

“This has serious implications for farmers and landowners who have diversified into agritourism, making the best out of old and disused buildings to generate extra revenue. Investing in this type of activity has been beneficial to this point, but removing the tax regime for FHL makes the returns on this type of activity much less attractive, especially if you factor in the cost of converting old buildings. Whereas in some areas, this policy might be effective in releasing more rental properties on to the market, it also has the potential to stifle rural investment, job creation, and reduce diversification opportunities.” 

A mixed bag  

Overall, Ian described the budget as a mixed bag for farmers and the wider rural economy.  

“Whereas the provisions around APR will reassure farmers looking to access funding from environmental schemes, it has the power to reduce food production and security,” he said. And the removal of the FHL tax regime will actually damage some farms and rural businesses. Sadly, Jeremy Hunt is unlikely to have gone far enough to really turn the countryside blue again, and the Tories are likely to feel the impact of that at the polls.”  

If you want to speak to anyone about the provisions of the budget, or require any advice on tax or financial planning, contact Ian Parker on (01295) 270200 or email ianp@whitleystimpson.co.uk. 

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