Flat-rate VAT payment decrease to cost farmers €61.5m in 2026
The biggest positive for farmers in the budget was the young trained farmer relief being extended for four years, providing full relief from stamp duty on conveyance or transfer of land to a young, trained farmer.
Irish farmers will get €61.5m less for their produce next year, due to farmers' flat-rate VAT payment decreasing from 5.1% to 4.5%.
Flat-rate farmers are not entitled to recover VAT charged on all farming expenses, because they are not VAT-registered. Instead, the long-standing flat-rate payment compensates them, added on to the price at which they sell their products to VAT-registered entities such as marts, meat factories, milk processors, etc.
This flat-rate addition has changed multiple times over the decades, calculated by a methodology accounting for VAT rate structures and a provisional forecast of agriculture inputs and outputs. The latest reduction also aims to avoid over-compensation, which would contravene the EU VAT Directive.
Unfortunately, it ensures changes in Budget 2026 have been overall negative for farmers.
This is clear from the Parliamentary Budget Office's tax measure briefing for Oireachtas members prior to the committee stage of the Finance Bill. It shows the biggest positive for farmers in the budget was the young trained farmer relief being extended for four years, providing full relief from stamp duty on conveyance or transfer of land to a young, trained farmer.
This is worth an estimated €19.8m per year to farmers in a position to avail of it. It had been due to expire at the end of 2025, but has been extended to promote lifetime transfers of land and encourage more young people to pursue post-secondary agricultural training and to subsequently become farmers.
According to the Tax Strategy Group, uptake of the relief has steadily risen since 2018, with 1,357 successful claims being made in 2024.
Another Budget 2026 positive for farmers may be worth €6m per year to them.
This is the accelerated capital allowances (ACA) for capital expenditure on slurry storage, which was first introduced in 2022, now proposed for an extension to the end of 2029.
It works as an incentive by allowing farmers to claim the entire allowance in just two years (50% a year for the first six years and 10% in the seventh year. The ACA for slurry expenditure reduces tax bills and improves cash flow in the short term. The broader purpose is to help the agricultural sector meet emissions and decarbonisation targets.
The cost and uptake of this scheme up to now are not known. The initial estimate for the full-year cost of the ACA scheme provided in Budget 2023 was €18m, predicted to fall to €9m in 2026, and this figure has been revised down to €6m in Budget 2026.
However, demand may increase because the latest proposals in the Nitrates Action Programme are likely to make increased slurry and soiled water storage necessary on many farms from October 1, 2028.
There is potentially another €1.5m a year in farmers in the budget decision to extend the farm consolidation relief from stamp duty until the end of 2029, along with a proposed broadening of the relief to include non-commercial woodland for conservation purposes (if it is owned and used for conservation for a further five years).
It provides that 1% stamp duty (as opposed to the general rate on non-residential property of 7.5%) is charged on the net difference between the value of land sold and land acquired as part of a Teagasc certified farm consolidation, where this takes place within 24 months.
The purpose is to encourage consolidation to reduce farm fragmentation and thus improve the operation and viability of farms.
Claimants must commit to retain ownership of their interest in the qualifying land, and use the land for farming for five years from the date of first claiming the relief.
The relief, in its current form, was reintroduced in 2017, after a similar relief expired in 2009. It was restored to mitigate the increase from 2% to 6% of non-residential stamp duty in 2018.
There were 102 successful claims for farm consolidation stamp duty relief in 2024, resulting in a cost to the Government of €1.5m.
Farm restructuring relief for capital gains tax, also intended to improve efficiency and reduce fragmentation of farms, was also due to expire at the end of 2025, but has been extended by four years, and broadened to cover both land under commercial forestry and non-commercial woodland or forestry that is used for sustainability and biodiversity purposes.
This relief is estimated to be worth €0.8m a year for farmers. It was first introduced in 2013. It has attracted a relatively low number of individual claimants each year, with 17 successful claims in 2023, which saved the claimants €0.8m of tax payments.
While tax revenue measures in Budget 2026 were worth €2,033.7m a year to all taxpayers, the huge €61.5m cost of the flat-rate VAT payment decrease ensures farmers end up as losers rather than winners. Additional funding has been allocated for specific measures relating to agriculture, but farmers are still likely to be losers.
The exceptions could be the landowners given an additional opportunity to dodge the residential zoned land tax on farmland by seeking a change in zoning in 2026, on the grounds the existing economic activity on the land is farming-related. Dodging the tax of 3% of the market value of land could be worth a lot to some individuals.
Other individuals in farming will stand to gain from other budget measures, such as €88m allocated for TAMS, tillage support of €50m, including a new scheme, continuing livestock schemes, and the increased ACRES allocation.
