VAT change set to hit 'small farmers hardest' warns TD
A reduction in the flat-rate scheme for farmers is "unfair" and hits small farmers hardest, a TD has warned in the Dáil.
One of the measures set out in Budget 2026 is that the flat-rate scheme for farmers will be reduced from 5.1% to 4.5% from January 1, 2026.
According to Revenue the flat-rate scheme is a special scheme for farmers who are not registered, or required to register, for Value-Added Tax (VAT).
"The scheme is designed to compensate flat-rate farmers for the VAT they incur on farming costs without having to register," Revenue stated.
According to the leader of Independent Ireland, Michael Collins, the drop in the flat rate from 5.1% to 4.5% will take money out of some farmers' pockets.
Deputy Collins said that it could mean "€600 less per €100,000 in sales".
"This is money that farmers rely on to cover the VAT they cannot reclaim for small farms.
"That is not just a number; it is feed, fencing, diesel and vet bills. It is a cut to farmers' bottom line, and it does not stop there," he cautioned.
Farmers and VAT
Deputy Collins also believes that the new VAT changes could "force" more small, mixed-income farms into full VAT registration.
He said this could add "paperwork, stress and costs".
"If a farmer earns from activities such as contracting or a farm shop, that income now counts towards the VAT threshold.
"That is a bureaucratic trap for small, diversified farms trying to stay afloat," Deputy Collins said.
Budget 2026
According to Alison McHugh, EY Ireland tax partner and head of private client services, Budget 2026 extended a number of agri- tax reliefs that were due to expire in 2025. These include:
- The accelerated capital allowances (100% over two years) scheme for capital expenditure on the construction of slurry storage facilities by farmers which will be extended by four years to December 31, 2029;
- The stamp duty exemption for transfers of farmland to a Young Trained Farmer is to be extended to December 31, 2029 subject to EU approval;
- Farm Consolidation Relief (a 1% rate of stamp duty on certain Teagasc certified farm consolidations) is being extended to December 31, 2029. The scope of the relief is to be extended, subject to EU approval, to noncommercial woodland.
- The Capital Gains Tax Farm Restructuring Relief is also to be extended to December 31, 2029. The relief will be broadened, subject to EU approval, to encompass both commercial and non-commercial woodland.
