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George's mixed bag

THE Chancellor George Osborne's August budget statement revealed a mixed bag for Scottish farmers.

On the surface, the announcement appeared to have little direct impact on Scottish agriculture, but in the detail there were several changes that will matter.

One such change, which has already been welcomed by farming bodies, was a 'tenfold increase' in the annual investment allowance. This will mean that farmers looking to invest in machinery will be able to purchase £250,000 worth tax free, a substantial rise from the previous £25,000.

This change will only stay in place for two years however, meaning those financially hit by the bad weather may not be able to make use of this measure.

Mr Osborne also bowed to pressure and cancelled the imminent 3p fuel duty increase, although NFU Scotland gave that concession a cool welcome, stating: "The cost of transport in rural Scotland remains prohibitive for those living and working in the countryside. As widely expected, the 3p rise in fuel duty planned for the New Year has been scrapped. While welcome, that must be set against the cost of fuel in some parts with diesel on sale at a crippling 152p per litre in one area of the Scottish Highlands."

An increase in tax free personal earnings to £9440 from April next year will benefit the lowest earners across the agricultural industry, while those that earn most will also benefit slightly, as the threshold for the 40% tax rate will rise by 1% in 2014 and again in 2015.

There was also an indication of possible investment in broadband in Aberdeenshire and Perthshire, but the extent to which rural areas will be involved has yet to be revealed.

Amidst these positive changes for farmers there were some potential problem areas, including the cut in the amount people can pay tax free into a personal pension. This was cut from £50,000 to £40,000 in 2014/15 and NFU Scotland were fearful this could hit farmers. A union spokesman said: "A lot of work on encouraging succession planning within our industry will not benefit from the announcement that the pensions lifetime allowance is being cut and the annual pension contributions qualifying for tax relief are being reduced from £50,000 to £40,000."

NFU Mutual personal finance specialist Sean McCann reckoned that farmers could use the increase in ISA allowances and other savings to help ease their inheritance tax liabilty.

"The inheritance tax threshold will increase from 2015 – but only by 1% – so the opportunity to pass on assets to the next generation free of tax is still being eroded by inflation.

"The announcement that shares quoted on the Alternative Investment Market will be available through tax-efficient Individual Savings Accounts could be a useful way for farming businesses to reduce their Inheritance Tax liability."

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