A fairer tax system for farmers comes into effect on 6 April 2016 writes Defra.
Under the new rules, initially announced in the 2015 Budget, farmers will be able to average their profits for Income Tax purposes from two years to five years.
The latest move will help farmers with fluctuating profits better manage risk and the impact of global volatility which has become an inherent feature of the agricultural industry.
Environment Secretary Elizabeth Truss said:
“Food and farming is already a vital part of the UK economy, generating £100 billion and supporting one in eight jobs. Our ambition is to make the industry a world-leader, turbo-charged by talent, skills and innovation so it can capitalise on the growing demand for, and excellent reputation of, British produce.
“Managing risk at a time of severe price volatility is vital. By remaining in the EU we avoid years of complication and uncertainty and can help build greater resilience in the supply chain.
“Having a tax system that accommodates the realities faced by farmers in a way that is simple to understand and use will also give farmers a vital tool to thrive in the face of volatility.”
Chancellor George Osborne said:
“A resilient and thriving food and farming industry is fundamental to the success of the UK economy. This government recognises the challenges our farmers face from volatile markets and we are absolutely committed to supporting them.
“Today’s reforms will provide farmers with additional security to plan and invest for the future, allowing them to spread profits over a longer period of time. Over 29,000 farmers can benefit from the changes, saving an average of £950 a year.
“The fairer tax system for farmers is among a number of reforms to taxes, National Insurance allowances and others measures coming into effect today to back hard work, support savers and economic security at every stage of life.”
As well as having the new option to average tax over five years, farmers will also retain the choice to average profits over two years.
The dual option, announced in December, follows industry feedback in consultation over how to deliver the extension that the two-year option was well understood and had provided significant relief to farmers dealing with financial pressures.