In the context of current economic pressures and political distractions, one might expect a relatively low-key budget, but what fiscal changes could be brought forward by the Chancellor which could affect the agriculture sector in particular?

Income tax

Income tax rate changes are unlikely, despite calls from opposition parties for the re-introduction of a 50% additional rate for high earners. We may see further tweaks to rate bandings and the rates which apply to different sources of income, for example further measures to equalise the rates which apply to earned income and dividend income. See comments on Scottish taxes below.

Pensions

The tax relief which applies to pension contributions has been dramatically reduced over recent years, as has the limit on the lifetime pot individuals are allowed to accumulate. There is no sign of this abating and we may see further restrictions being applied to the amount of tax relief available for sums going into pension pots.

Capital gains tax

Those involved in agriculture are often asset rich, if cash poor, so capital gains tax (CGT), which applies to the disposal of assets including land and buildings, has always been an important area to watch. While CGT rates are currently at historically low levels and no significant changes are expected, we will be keeping a close eye out for subtle changes which could be made to the reliefs currently enjoyed by farmers, such as entrepreneurs relief, hold-over relief and roll-over relief.

Inheritance tax

Inheritance tax reliefs in the form of agriculture property relief and business property relief where up to 100% of the value of assets can be exempted from the charge to IHT on death have long been suggested targets for successive chancellors.

The removal or restriction of these reliefs would have a major impact on the agriculture sector. A big collective sigh of relief will be heard if another budget passes with these reliefs still intact.

VAT

A possible area for the Chancellor to seek to raise revenues may come from VAT. A rise from the current standard rate of 20% would be politically unpopular, but may prove too tempting for the Chancellor to ignore. Most businesses in agriculture will be VAT registered and able to recover input VAT, but there would still be cost and cashflow implications for all in the sector.

Stamp duty or land and building transactions tax (LBTT)

Hotly tipped for a change to attempt to stimulate or help facilitate a more fluid housing market is stamp duty. In Scotland, we have LBTT and, while the regime for it is devolved and set by Holyrood, any significant changes to stamp duty introduced by Westminster may force the Scottish Government to follow suit.

Scottish taxes

The Scottish Government holds existing powers to vary the rates and bands of income tax for earned income and control over property tax (LBTT). For the first time, in April 2017, the Scottish Government used its powers to set a different higher rate tax threshold from the rest of the UK. The Holyrood Budget for 2018 is due to be presented on 14 December 2017 and a “modest” increase in income tax is expected. The extent to which there will then be a differential between Scottish tax payers and taxpayers in the rest of the UK remains to be seen.

Of course, all of the above are merely suggestions and all or none may come to pass. Individuals and businesses should take appropriate advice specific to their circumstances before taking any action.

*Graeme Davidson is a partner with EQ Accountants LLP in Forfar. EQ have a large team looking after clients in the rural sector across Scotland. www.eqaccountants.co.uk/agriculture.