Hobby Farming

Hobby Farming

by | 18 Jul, 2024 | Agriculture & Horticulture

Hobby Farming

Engaging in hobby farming can be a rewarding pursuit, offering both personal satisfaction and potential financial benefits. However, hobby farmers must navigate various tax implications, especially when dealing with trading losses. Understanding these rules can help you manage your finances more effectively.

So, we’ve decided to briefly explore the intricacies of claiming trading losses in hobby farming, and how we, as agricultural accounting specialists, can assist you in maximising your tax reliefs.

Here goes!

 
Trading Losses in Hobby Farming

 

Trading losses incurred in a tax year can be claimed against your other income. However, these could be caught by the five-year rule, which restricts your claim if you have recorded losses (disregarding the effect of capital allowance) in each of more than five consecutive tax years. The year of commencement is not counted for this purpose, so in the case of a new business which makes losses consistently, the loss of the seventh tax year is the first to be caught.

 

Limits on Income Tax Reliefs

 

You should be aware that there is a limit on the total amount of income tax reliefs that an individual may claim for deduction from total income for a tax year. Loss relief is one of the reliefs affected. The limit is the higher of £50,000 or 25% of the claimant’s adjusted total income of the year.

 

How We Can Help

 

Navigating the complexities of hobby farming tax implications can be challenging. As specialists in agricultural accounting, we are here to help you understand and manage these rules. Our expertise ensures that you can maximise your tax reliefs and maintain financial stability in your hobby farming ventures. We provide personalised advice tailored to your specific circumstances, helping you optimise your financial planning and secure your farming future.

 

Conclusion

 

Hobby farming can bring both joy and financial rewards, but it’s essential to understand the tax implications, especially regarding trading losses. By being aware of the five-year rule and limits on income tax reliefs, you can better manage your finances. With our specialised agricultural accounting services, we can guide you through these complexities and help you make the most of your hobby farming activities. Contact us today to learn more about how we can support your hobby farming journey.

 

☎️ Midhurst: 01730 817 243 | ☎️ Chichester: 01243 782 423 | ☎️ Whiteley: 01489 287 782
Lewis Pridgeon
About our Agricultural Accounting Expert

Lewis Pridgeon – IAAP, MIAB, MAAT, ATT

Lewis Pridgeon IAAP MIAB MAAT ATT, our Agricultural Accounting expert, joined the tax team back in 2013. As a full member of the Association of Taxation Technicians, he has extensive knowledge in various areas of tax and accountancy in addition to his specialism in Agricultural Accounting.

 
 
If you’d like to speak to one of our experts, please call 01243 782 423. Alternatively, please email us from our contact page and we will be in touch!

We also update our YouTube channel regularly with new content, see here: Lewis Brownlee YouTube

Farmers Averaging

Farmers Averaging

by | 18 Jul, 2024 | Agriculture & Horticulture

Farmers Averaging

Navigating the financial unpredictability of farming can be challenging. But thankfully farmers averaging offers a valuable tax relief option.

This special tax treatment allows farmers to average their profits over two or five years, helping to stabilise their taxable income and reduce the impact of fluctuating profits. By meeting specific criteria, farmers can benefit from a more consistent tax burden. So, farmers looking to ensure better financial planning and stability will want to familiarise themselves with this today.

Here’s what you need to know!

 

Special Tax Treatment for Farmers

 

Provided certain conditions are met, special tax treatment is available to farmers. They are allowed to average their profits for tax purposes over either a two-year or five-year basis.

 

Scope of Farmers Averaging

 

The farmers averaging only extends to farming profits after capital allowances. Other sources of income like rental from investment properties cannot be included within the averaging claim. So, please bear this in mind!

 

Eligibility Criteria
Five-Year Averaging

For five-year averaging – The difference between your profits for the year in question and the average of the profits for the 4 previous tax years must be more than 25% of the profits of the higher figure. This condition is also satisfied if any one of these years has nil profits or a loss. You cannot make a claim where the difference between the profits is 25% or less.

 

Two-Year Averaging

For two-year averaging – The difference between the profits for the 2 years must be more than 25% of the profits of the year with the better result. You cannot make a claim where the difference between the profits is 25% or less. The profits of any one of the two or five years under consideration is nil for the purposes of averaging if a loss has been recorded. Loss relief claims can then be made in the usual manner.

 

Purpose of the Averaging Scheme

 

The averaging scheme intends to protect farmers from excessive exposure to higher rates of tax in years of good profitability.

 
Farmers in Partnerships

 

If you are part of a farming partnership then you can claim averaging irrespective of what the other partners do. This will be determined based on your personal circumstances.

 

Restrictions on Averaging

 

Averaging is not permitted for contract farmers, where the cash basis of accounting is used or when the trade is ceasing.

 

How we can help!

 

Dealing with farmers averaging can seem daunting. But, as specialists in agricultural accounting, we are always here to help!
We understand the unique challenges farmers face in managing their finances. So, our expertise ensures that you can navigate the complexities (both of farmers averaging and other tax relief options!) with ease.
 
As Agricultural Accounting specialists, we are dedicated to helping you optimise your financial planning, reduce your tax burden, and secure your farm’s financial future. So, why not take the hard work out if it? Let us guide you through the process, providing personalised advice and support tailored to your specific circumstances, leaving you free to deal with what matters most!
 
Contact us today to find out how we can assist you in maximising the benefits of available tax treatments. Alternatively, if you would like to find out more, please do check out our dedicated Agricultural Accounting webpage. Then, when you’re ready, we’re ready!
 
You can book a free introductory meeting with our Agricultural Accounting specialists to find out what we do and how we do it. After all, we’re always happy to see how we can help partner in your success!
 
 
 
☎️ Midhurst: 01730 817 243 | ☎️ Chichester: 01243 782 423 | ☎️ Whiteley: 01489 287 782
Lewis Pridgeon
About our Agricultural Accounting Expert

Lewis Pridgeon – IAAP, MIAB, MAAT, ATT

Lewis Pridgeon IAAP MIAB MAAT ATT, our Agricultural Accounting expert, joined the tax team back in 2013. As a full member of the Association of Taxation Technicians, he has extensive knowledge in various areas of tax and accountancy in addition to his specialism in Agricultural Accounting.

 
 
If you’d like to speak to one of our experts, please call 01243 782 423. Alternatively, please email us from our contact page and we will be in touch!

We also update our YouTube channel regularly with new content, see here: Lewis Brownlee YouTube

Succession Planning for your farming business…

Succession Planning for your farming business…

by | 13 Dec, 2020 | Agriculture & Horticulture, Business, Tax

Succession Planning for your farming business…

Now is the time to look at the succession planning for your farming business…

It may not seem it, but the current tax regimes for Inheritance Tax is relatively generous. This is certainly the case when they are compared with the ones that are forecast to come next year.

There is no Inheritance Tax to pay on gifts or bequests between spouses or civil partners. You can give them as much as you like during your lifetime, as long as they live in the UK permanently.

There is also no inheritance tax due on the first £325,000 worth of assets passed on death or chargeable assets given in life.

Reliefs are available for inheritance tax purposes for lifetime gifts of business and agricultural property. This also includes transfers into discretionary trusts.

People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death.

If the giver dies within 3 years of the gift, the recipient pays inheritance tax at 40% of the value when given. There is a reducing amount of inheritance tax due in the next 4 years and if the giver survives 7 years after the gift, there is no inheritance tax due on the gift. These are called potentially exempt transfers (PETs).

Currently, on death, there is an uplift of the value for capital gains tax purposes of assets left to family and other beneficiaries. If the estate has items such as property, these are treated as received by the beneficiaries at their value at the date of death. This reduces any capital gains tax due if they are subsequently sold.

At the moment, values are low, due to Brexit and COVID.

We all know that taxes will need to be raised to pay for the costs of COVID. The government have pledged not to raise income tax, national insurance contributions and VAT. So it needs to look at other means of raising revenue…

It has been proposed that PETs be removed, so gifts in life exceeding the exempt amount would be taxable on the recipient.

The amount that you can gift in life or leave in death without tax being due is currently £325,000. This amount may decrease.

Agricultural and business property relief is another area at risk. It may be that if these tax saving reliefs are available, the capital gains tax uplift on death may not be.

Lewis Brownlee can help you with your succession planning. We can sit with you (socially distanced, of course) and help you decide what you want to achieve. We will then work with you to make your succession plan as tax efficient as possible.

If you would like to discuss your options with us, or would just like to speak to one of our Agricultural and Horticultural Specialists you can call us on 01243 782 423 or head to our contact page and they will be in touch!

To lease or buy your new agricultural and horticultural equipment?

To lease or buy your new agricultural and horticultural equipment?

by | 2 Nov, 2020 | Agriculture & Horticulture, Business

It is hard enough for you to run your business, without having to know the rules for tax and accounts for HP, leasing and buying equipment.

Our team understands that every financial decision you make is important, and where or how you spend your money matters. 

Some points to consider before making these decisions are:

  1. Will you be able to cover any maintenance costs that will incur should you buy equipment outright?
  2. Does your business have a good credit rating?
  3. Is your cash flow consistent enough to sustain monthly payments?

Our specialists can assist you in considering these points and can calculate the tax and VAT effect of each of the options, as getting it right can save you money.

We can also let you know how your accounts will look if you take out HP, if you lease and if you buy.

Lewis Brownlee is here to help you.

If you would like to discuss your options with us, or would just like to speak to one of our Agricultural and Horticultural Specialists you can call us on 01243 782 423 or head to our contact page and they will be in touch!

Change for farming and horticulture – How Lewis Brownlee can make this easier for you.

Change for farming and horticulture – How Lewis Brownlee can make this easier for you.

by | 26 Oct, 2020 | Agriculture & Horticulture, Business

The industry is constantly changing and farmers and horticulturalists have shown themselves to be adaptable and resilient in the face of this change. We can be your trusted partner in taking your business forward profitably.

Xero is a strong and flexible cloud-based tool to deal with your accounting. In addition, there are industry specific add-ons to help you with your business decisions.

These can track the income and costs of your individual crops by season and by field. This can aid decisions such as whether to renew the lease on a field. They will also record your livestock and other products, tracking their profitability.

They take your data from Xero, so nothing has to be entered twice.

Figures from Xero can be used to create long-range projections. The scenarios can then be changed to provide information for decisions such as “Should I consolidate my debt?”, “Should I buy the neighbouring farm?” and how diversification will really affect your business’s figures.

You can then readily report management information for the bank or other lender.

Budget and actual can be compared in real time, in as much detail as you want. The key is, if you can’t measure, you can’t manage.

Change is hard. Lewis Brownlee can help make it easier for you.

If you have any questions, or would just like to speak to one of our Agricultural and Horticultural Specialists you can call us on 01243 782 423 or head to our contact page and they will be in touch!

Agriculture and Horticulture and R&D

Agriculture and Horticulture and R&D

by | 4 Aug, 2020 | Agriculture & Horticulture, Business

Agriculture and Horticulture and R&D

Is your farming or horticultural company innovating to improve your business?

This could mean that you can claim research and development (R&D) tax relief… R&D is not only done by scientists and computer specialists.

Any innovation aimed at “making an advance in science or technology” can lead to tax relief. The project does not even have to work.

If your company pays corporation tax, you could get a reduction to your taxable profits of up to 230% of the R&D spend.

If your company is making losses at the moment and is small or medium sized, it may be possible to get up to one third of your R&D costs as a payable credit from HMRC.

If it is your first claim, it is possible to look at the previous 2 sets of accounts as well as the current ones.

R&D claims can be tricky and we can help you! 

Our agricultural and horticultural team of Christine Deacon and Melanie Phillips would be happy to help you!  You can call us on 01243 782 423 or head to our contact form and we’ll be in touch!

Business Services Director - Chichester