Something for everyone in the audience?

Budget 2024 has been described as a latter day Late Late Show, with something for everyone in the audience. That includes farm businesses, though more so in terms of a continuance of existing farm-related taxation measures and concessions rather than anything startlingly original.

Personal taxation concessions

In relation to changes to personal taxation and implications for farmers and their spouses, Marty explains: “The threshold for the 20 per cent rate of tax, previously payable on income up to €40,000 per annum, has increased by €2,000 to €42,000. For a single-income farm-family couple, the standard income-rate threshold has moved up to €51,000. For a farming couple where one spouse is working off-farm, the total relief from the budgetary changes provides for €84,000 combined earnings to be taxed at the lower standard tax rate.” That concession puts extra income in a farm family’s pocket, provided, of course, that one or both incomes are high enough to benefit from the raising of the thresholds, which is not the case for many farm families.
Taxpayers subject to the Universal Social Charge (USC) the ‘temporary emergency tax’ brought in after the financial crash all of 15 years ago, have benefitted from a reduction in the USC tax rate, as Marty confirmed: “The 4.5 per cent USC rate, which catches most people earning in excess of the basic cut-off income, has been reduced by 0.5 per cent to 4 per cent.”
He continued: “The second band has also seen a small reduction for higher earners. In addition, the ceiling for payment of USC has been raised to €25,760. These are modest positive changes, but they all add up in the calculation of annual earnings. There was another small nod towards alleviating the tax burden with personal tax credits rising by €100 to €1,875. For employees, tax and earned income credits improved by the same figure of €100 to €1,875. That’s money directly into a taxpayer’s pocket.
“Looking at the totality then for a couple earning, for instance, €55,000 per year, the total benefit should work out at €917 per annum. For a couple in a higher-earning bracket, with one working off-farm and the other engaged in profitable farming for example, with €100,000 joint income, the benefits in terms of reduced personal taxation for that couple work out at €1,600 in a full year. Add in the various financial cushions that are in place for energy costs, with three payments of €150 spread across the winter to April 2024, and a doubling up of various social-support payments for December, and the end result is some alleviation in the living cost pressures on households. The caveat is that the inflation rate, while it has been falling, is still at a high level and current political and military turmoil across the world has the potential to increase living and business costs in the months ahead, eroding any concessions from the budget.”
For the many retired farmers, there is a €12 per week increase in the old-age pension and for those farm businesses that have diversified by renting out a property on the farm, there will be a €3,000 per year income disregard on the standard income tax band, says Marty. “That’s an aspect of Government strategies to encourage the retention of small landlords in the rental market, when many are moving out of the sector,” he adds.

Agri taxation concessions maintained

The IFAC expert had reasonably positive news on the agri-taxation front, particularly in relation to inheritance and capital taxes, generally: “There were no significant changes in the capital tax area for the farming community, though there were some notable concessions. For the young, trained farmer, where previously he or she would have had stamp duty relief up to €70,000, that concession has been increased to €100,000.
“Consanguinity relief has been extended out for a further five years. That’s positive on several fronts, including providing assurance that the relief will remain in place from an inheritance-planning perspective. In another concession to supporting inheritance planning, the land value ceiling has been increased, reflecting increases in value and the age limitation has also been raised to 70 years.
“We were anticipating increases in thresholds for inheritance to move upwards, from €335,000 for instance for direct descent inheritance and lower levels for more indirect relationships. That didn’t happen and could be seen as a hidden additional inheritance taxation hit, with property values rising generally,” he says.

Land-leasing concession tightened

There has been much farmer agitation at what has been seen as a hoovering up of large farms by wealthy investors. That issue was somewhat addressed in Budget 2024, Marty explains: “Basically, the long-term land rental relief will not apply unless the land has been owned for seven years. That could act as some discouragement for potential investors buying land as a wealth-gathering exercise without any intention of farming the land, and then leasing it out again for a tax-free income. It may not prevent non-farmers buying land, but it will be a deterrent for some.”

Flat-rate VAT hit

On the negative side of Budget 2024, the Government lowered the VAT flat rate refund, which, Marty says is an ‘unfortunate change’. “There was a reduction last year but given the fact that farm incomes are under pressure this year, the timing alone is unwelcome. "Ultimately, it represents a €17m reduction in income for the farming community, taken in its entirety. Traditionally, farmers did not have to register for VAT, instead using a flat-rate scheme, reducing the hassle of compiling VAT returns. At its peak, that reduced rate was at 5.8 per cent, and now it is down a full 1 per cent to 4.8 per cent.”
Marty noted the postponement of additional carbon tax to May 1, 2024, but pointed out another harsh reality: “While the increased rate was due to be implemented immediately, the reality is that a previously postponed carbon tax increase will kick in anyway, so that businesses and everyone else in society will take another carbon tax hit immediately, with the prospect of another increase by mid-2024.”