Farmers are glad that fuel excise levies have been delayed

The pause on increases in Vat and levies on fuel and power is a relief, but farmers will be studying fine details in Budget 2024 including capital gains tax relief and stamp duty

A shopper pauses to watch Finance Minister Michael McGrath announce the details of Budget 2024 on TVs in Arnotts department store in Dublin. Picture: Sasko Lazarov/Rolling News 

This year's budget, presented by Finance Minister Michael McGrath, has sought to please everyone by dividing the spoils across income and age demographics, across those who are employed and those in receipt of social welfare, those who rent and those who are under pressure with mortgage interest hikes. 

In delivering his speech, Mr McGrath acknowledged that inflation had caused difficulties for households and noted most recent data showing inflation easing to 5% in September. He further commented that he expected this trend will continue in the coming months improving real household incomes and purchasing power. 

Let's get a correction in here. 

Inflation at any level erodes household purchasing power, as any undergraduate economics student will concur. If your food bill went up by 15% last year and is set to only increase by 5% in the coming year, the cost of putting food on the table will have increased by 20% in total.

A drop in the inflation rate will not increase purchasing power until the inflation rate turns negative, ie becomes deflation. With inflation still clearly present in the economy, the only hope households have of preserving the purchasing power of their existing incomes is either in the form of reducing the tax take or an increase in the benefits that the household receives. 

Household income can of course increase from extra work undertaken or from an increase in the rate of pay. 

Thankfully, on some of those fronts, Budget 2024 has delivered a measure of relief. 

The main benefits which households can expect to gain from are double child benefit for Christmas, an increase of €12 per week in core social welfare payments, three electricity credits of €150 each spread over the coming winter period, a reduction in income tax payable where those within the household are paying PAYE or income tax as a result of an increase in tax credits, tax bands, and a drop in the USC rates. 

The income tax savings are more pronounced where an individual is earning more than €42,000 (or €51,000 in case of certain couples).

A single person earning more than €42,000 per annum will benefit from an income tax saving of €600, €400 derived from the increased lower rate tax band and €200 derived from the increase in tax credits, a USC saving of €142, and with no change to PRSI at employee or self-employed levels. 

The lower USC tax bands is increasing, and the rate of USC applied to the mid-tier is dropping from 4.5% to 4%. The minimum wage is increasing substantially to €12.70 per hour, and the increase in the lower rate USC band will see a full-time worker on minimum wage stay outside of the mid-tier USC tax band. 

For mortgage holders, mortgage interest tax relief will apply for homeowners with an outstanding mortgage balance on their primary dwelling house of between €80,000 and €500,000 as of 31 December 2022. 

Relief will be available in respect of the increased interest paid on the mortgage in the calendar year 2023 as compared with the amount paid in 2022, at the standard rate of 20% income tax. The relief will be capped at €1,250 per property. 

Landlords will benefit from a temporary tax relief.  Rental income of €3,000 for the year 2024, €4,000 for 2025 and €5,000 for the years 2026 and 2027, will be disregarded at the standard rate where the properties held by the landlord availing of the relief must remain in the rental market for four years.

Measures of particular interest to farmers 

On the farming side, farmers will be happy that the Vat rate on electricity and gas will remain at 9% for another 12 months, and the scheduled increases in excise levies on fuel are being delayed until April and August of next year.

Capital gains tax

The capital gains tax relief which typically applies for farmers transferring assets to children is being augmented with a new cap of €10m looking likely to be set, with a change to the age limits for the reduced caps that currently apply from age 66. The flat-rate farmers Vat addition to income is set to be reduced from 5% to 4.8%. 

For a dairy farmer milking 100 cows, the likely impact is a drop in income of €400-€500. For a Vat-unregistered cattle farmer finishing 700 cattle per year, the cost would be in the order of €200.

It seems odd that the flat rate addition is dropping at a time when input prices are seeing rampant inflation, more especially across those inputs which attract Vat (fuel, contractors and some veterinary costs to name a few). Meanwhile farm incomes have been dropping, meaning the flat rate addition is given out on a smaller pot. 

The flat-rate Vat credit which unregistered farmers receive is meant to compensate them for the Vat costs incurred on their inputs. 

Stamp duty

On stamp duty, farm transfers can be executed at a 1% rate between certain blood relatives where conditions are satisfied rather than the standard 7.5% on commercial property. 

This relief is known as consanguinity relief, and this budget has seen an extension to that relief for five years. 

An increase in the maximum benefits under young trained farmer relief, succession tax credits, and stock relief is also announced bringing the cap from €70,000 of benefits to €100,000. 

Capital allowances and land leasing

Accelerated capital allowances for farm safety equipment are extended to December 31, 2026. 

On land leasing, there is a major change this year which may arrest the perceived market interference by investors. The Land Leasing Income Tax Relief will be amended so that it only becomes available when the land has been owned for seven years so that it is better targeted to active farmers. 

The Vat registration points are increasing marginally from €37,500 for services and €75,000 for goods to €40,000 for services and €80,000 for goods.