Brown hikes fuel duty but the devil’s in the detail

The Chancellor of the Exchequer will slap an additional 1.25p/litre on red diesel from September in a budget that left farmers’ leaders underwhelmed.

For a 1012ha (2500-acre) farm typically using 100,000 litres of fuel a year, that will raise costs by £1250, according to consultant David Canty at Strutt & Parker.

John Kinnaird, president of NFU Scotland, said: “Whilst a freeze until Autumn is welcome, there is still a fundamental problem with our fuel taxation system, which has a disproportionate effect on rural areas.”

He also slammed the shake up to road tax, which will cost the drivers of polluting cars like 4x4s an extra £25-45.

In other headline measures, Mr Brown announced a rise in the threshold for inheritance tax to £285,000 in the coming tax year, rising to £325,000 by 2009. The capital gains threshold for individuals rose just 3.5% to £8800.

The threshold for stamp duty land tax rose slightly to £125,000, benefiting some farmers, and there was good news for farming partnerships, according to Carlton Collister, a senior tax manager at Grant Thornton.

There was also good news for farming partnerships and for biofuel companies, which saw the renewable transport fuels obligation reaffirmed and extended beyond 2011.

The corporation tax burden was also been lightened for small companies, with the extension of the first year allowance to 50%.

But property held in trust looks set to attract greater tax in the future.

Other increases which may affect farmers include a seven-fold increase in the landfill tax to £21/tonne and a with-inflation increase in the climate change levy. The 50% CCL relief for horticulture has also been abolished.

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Budget summary
 Red diesel duty up 1.25p/litre
 Polluting vehicles’ road tax up to £215
 IHT threshold up to £285,000
 Stamp duty land tax up to £125,000
 First-year allowance up to 50%
 Pint of beer up 1p
 Bottle of wine up 4p
 Pack of cigarettes up 9p