The Inheritance Tax changes will be the headline grabbing feature for many rural property owners. But is all what it seems? A few other budget points also need attention if you’re interested in rural property and farming.
Business-wise the decision to set the Annual Investment Allowance at £200,000 permanently from January 2016 is important, and relatively welcome. It was to have dropped from £500,000 to a mere £25,000 from that date. So while £200,000 is a welcome step up it still won’t go very far on a large farm needing to re-equip with large tractors, harvesters and other specialist kit. We will also need to be careful about transitional arrangements between the two amounts. Unless your year ends on 31 December the allowance this accounting year will not total £500,000 but a time apportionment of the two limits depending on where your year end falls. Expenditure will also need to be timed to catch the higher allowance before the end of December.
Trust taxation will also need attention in a few cases with detailed changes likely to affect a number of trusts where additional property is added by the settlor. This seems to be aimed at Mainstream (old discretionary) trusts with regard to both the entry and 10 yearly charges.
Corporation Trust continues its apparently inexorable trend downwards with the rate set to hit 18% from 1 April 2020.
Farm and estate insurance will cost a little more with Insurance Premium Tax rising from 6 to 9.5%, but the reinstatement of Aggregates Levy exemptions withdrawn in 2014 on materials like slate and clay may help some rural property owners.
Rural landowners who like to buy expensive gas guzzlers will find their first year rates of Vehicle Excise Duty set at eye-watering rates, but dropping to £140 a year after that provided the car was not too expensive in the first place. Meanwhile the rural peasants who have to make do with running about in ancient hand-me-down gas guzzlers will continue with the punitive VED rates on older more fuel-expensive cars.
Sticking with the peasants, the increase in the rent a room relief from £4,250 to £7,500 on 6 April 2016 may be useful for anybody with a room to spare. Ideal for some of those rural ‘pensioner pockets’ identified by the National Housing Federation where young people can’t afford to live perhaps?
Other than the Rent a Room Relief, landlords will find their tax relief on mortgage interest successively restricted from 2017 onwards so that by 2020 all mortgage interest relief will only be allowed at the basic Income Tax rate of 20%, rather than whatever marginal income tax rate applies to the owner’s overall income.
And as for the IHT changes that’s another story and another blog post: