The period over which farmers can average their profits for tax purposes will increase from two to five years from April 2016.
The new rules were announced by Chancellor George Osborne in his 2015 Budget and will apply only to sole traders and partnerships. Companies will not be covered by the new rules.
Presenting his 2015 Budget to Parliament, Mr Osborne acknowledged and agreed with the National Farmers’ Union’s (NFU’s) argument for such an extension, which is predicted to save farmers £950 on average per year. Tax experts predict that sole traders will benefit from the rule change the most, along with farmers that generate income from diversification.