Last year’s wet winter meant many growers pushed back drilling to the spring just to find more rain along with the associated difficulties.
Yield for this year’s harvest is expected to be lower and prices are going to be nowhere near the premiums achieved for the 2022 crops and may result in much lower profits or even a tax loss, before you deduct the cost of any machinery purchased.
Choosing the right tools and navigating tax strategies wisely are essential for keeping your farm financially buoyant. Below we have discussed the ways in which making astute choices regarding machinery and taxes can secure the profitability of your farm:
Machinery: Powering Up Your Farm
Getting the right machinery isn’t just about the latest equipment—it’s about making your farm run smoother and faster. Think about what you really need, like tech upgrades and cost-effectiveness in the long haul.
Modern gear can do wonders, cutting down on labour costs and boosting your output. But don’t just dive in—plan your purchases carefully, considering your budget and financing options.
Taxes: Turning Losses into Wins
Farmers can even out their taxable profits over the last four tax years. If there’s a loss, it’s dealt with separately. This can shift profits previously taxed at a higher rate to a lower rate, potentially saving on taxes. For instance, profits taxed at 40% could drop to 20%, resulting in tax savings. But if a loss from a big machinery purchase isn’t reevaluated and shifted properly, it could go to waste.
From experience, a review of previous year’s tax losses and a “tax optimisation” reallocation after the 5 year averaging is something often overlooked by accountants not specialising in farm tax.
Putting It All Together: Making Moves that Matter
By planning your gear purchases with tax breaks in mind, you can make every pound count and give your farm a competitive edge.
By integrating these practices into farm management, farmers can fortify their financial resilience and ensure long-term profitability amidst fluctuating market conditions and operational challenges.
