The opportunity for farmers to average profits for Income Tax purposes over five years, instead of the previous two years, came into force on April 6, with the new system described by Defra as being “fairer” for the industry.
“Managing risk at a time of severe price volatility is vital,” said Environment Secretary, Elizabeth Truss, commenting on the new rules which were initially announced in the 2015 Budget,
“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.”
When Chancellor George Osborne (pictured above) first announced the rule change, he said the reform will produce an average tax saving of £950 a year for Britain’s farmers.
“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,” said Defra, adding that the dual option follows industry feedback that the previous two-year averaging option was well understood and had provided significant relief to farmers dealing with financial pressures.