Farmers’ averaging relief is a government incentive to assist farmers and market gardeners to smooth fluctuating profits, by averaging profits over a period and being taxable on that average.

From 2016/17 new rules were introduced for farmers’ averaging relief with the relief being extended to cover either a two year or a five year averaging period. The Government has suggested that over 29,000 farmers can benefit from the changes, saving an average of £950 a year.

The relief is available to sole traders or partners but not limited companies and is not available in the year a business commences or ceases.

For two year averaging there must also be a difference of more than 25% between the years being averaged. For five year averaging there must be more than 25% between the latest year and the average of the previous four years.

Farmers’ averaging relief can be particularly beneficial where:

  • There are unused personal allowances in a particular tax year
  • There is a loss
  • Profit is being taxed at higher rates and this is unusual
  • There are one off other income sources or claims for other reliefs in the year

Any claims for averaging are included in Self-Assessment Tax Returns and have time restrictions. Claims must be made within 22 months after the end of the latest year of assessment being averaged.

If you think you may benefit from an averaging claim, or want to discuss any of the points raised in this blog, please get in touch with me:

01224 623 111

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The information in this blog should not be regarded as financial advice.  This is based on our understanding in February 2018. Laws and tax rules may change in the future. Campbell Dallas is not responsible for content contained on 3rd party sites.