How the new tax year might affect your land rent payments

Topic: Brexit Read Time: 3 mins
Landowner type: Independent landowners Energy: Onshore wind
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The end of the tax year evokes all sorts of emotions in people. For some, the thought of the paperwork and facing their accounts fills them with dread; for others, it’s a motivating factor to finish on a high or start a new cycle with a fresh sheet. 

This time of year also tends to impact land rent payments, and there are some factors you’ll want to be aware of to ensure you are getting the best negotiation. 

Firstly, some context: there are two ways rent payments are calculated. The minimum rent fee is a flat rate, and turnover rent is based on energy output and activity. 

The price of inflation 

It’s expected that inflation will go up at some point in the year, meaning rent payments are likely to be static. The standard expectation is that rent payments go up by about five per cent with inflation, but if there is an increase, the most likely scenario is a payment freeze, and for those who do see an increase, it’ll only be by a per cent or two. 

All this is because the minimum rent payment is linked to inflation and increases slower when interest rates rise, and turnover rent is affected by energy prices that would go down, so the money made from the energy source would be less. 

photo showing how next tax year is going to affect rent payments
photo showing the effects of Brexit

The price of Brexit 

Brexit could actually positively affect both rent payments, especially if we get a hard Brexit. As the value of the pound decreases and the price of imports increase, the cost of electricity will see a hike, as will the cost of living, which will, in turn, affect inflation and minimum rents. 

See, we currently import electricity from the Internal Energy Market, and once our relationship with the EU changes, this may need to be renegotiated. As a result, we could find ourselves in a position where there is more demand in the UK for wind energy and electricity, which will increase turnover rents.

The Budget 

Based on the 2017 Autumn Budget announcement, farmers will save more money in the new tax year. The Personal Allowance is set to go up by £350, while the basic income tax rate goes up by £1,000 to £34,500.

In addition, self-employed workers who pay Class Four National Insurance will be able to keep £1,350 more of their money before falling into the higher earnings threshold. 

Let’s break it down

A farmer whose wind farm produces £11,850* will get an extra £88.20**: 

  • so this year they keep £11,300.06
  • and next year they keep £11,388.26. 

A farmer whose wind farm produces £46,350* will get an extra £263.70**: 

  • this year they keep £35,619.50 
  • while next year they keep £35,883.26.

The effects on you personally

It’s hard to assess what these factors combined will mean for landowners, but given that rent payments increase annually, landowners will be impacted in some way at different times. 

Ensuring you are receiving accurate returns from your renewables investment can be a challenge as it is. That said, with the right guidance and an expert renewable energy auditor’s eye, any discrepancies due to inaccuracies can be mitigated. 

So if your rent payments contracts are due for review soon, it’s worth considering whether you can renegotiate a better deal. 

*Assumes no other income. Applies to those who are self-employed but not in receipt of married or blind persons allowance. 

**These figures are estimates.