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Budgeting for 2024’s tax bills
Tax may not be a favourite topic on farms, but it’s one that can’t be ignored, especially as the mid-November deadline creeps in each year. For many farmers, tax is one of the largest annual expenses after feed and fertiliser. With stronger farm incomes reported across 2024 and continued optimism heading into 2025, now is the time to plan ahead for bigger tax liabilities.
Profit margins in dairy, beef, and tillage sectors have all surpassed 2023 levels, and if current pricing trends hold, next year could deliver another financial boost. That also means tax bills due this November (based on 2024 earnings) and November 2026 (from 2025 profits) may be the highest seen since 2022.
The key message: don’t wait. We’re encouraging farmers to take early action, not just to identify opportunities for tax efficiency, but to ensure they’re financially prepared when the bills arrive.
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Marty Murphy, Head of Tax
Case study – dairy farmer
Let’s take the example of a typical 80-cow spring calving farmer based in the midlands:
118 acres owned in two blocks
Sole trader business
Spouse working off-farm (full use of standard rate band and tax credits)
Drawings: €18,000–€20,000 per year
3 adult children (2 working away, 1 in college)
Last major investment: parlour and slurry storage (7 years ago)
Loan: €67,000 remaining with 4 years left
Capital allowances falling sharply
No HP or short-term debt
No identified successor
| A: Updated 2024 Tax Liabilities (2023 vs 2024) | 2023 | 2024 |
|---|---|---|
| Net Profit After Addbacks | €103,687 | €131,574 |
| Capital Allowances | €23,796 | €13,874 |
| Taxable Income | €79,891 | €117,700 |
| Pension Contribution | €22,000 | €38,000 |
| Taxable (After Pension) | €57,891 | €79,700 |
| Income Tax | €11,606 | €19,730 |
| Tax Credits | €3,550 | €3,750 |
| USC | €2,894 | €5,976 |
| PRSI | €3,276 | €4,826 |
| Net Tax Liability | €17,776 | €30,531 |
Even though profits rose 27%, the net tax liability jumped 72%, mainly due to lower capital allowances and more income taxed at the higher 40% rate.
| B: Cashflow Implications – With Pensions | 2023 | 2024 |
|---|---|---|
| Balancing Tax on Prior Year | €17,776 | €12,755 |
| Preliminary Tax for Current Year | €17,776 | €30,531 |
| Pension Contribution | €22,000 | €38,000 |
| Total Cash Outlay | €57,552 | €81,286 |
The farmer's 2024 tax and pension outlay jumps to €81,286, up over 41% from the previous year. While pensions represent half the cost, they’re also saving tax at the 40% rate and building a retirement fund.
If 2025 turns out to be a lower-profit year, the farmer may qualify for a refund when filing in 2026.
| C: What If No Pension Contributions Were Made? | 2023 | 2024 |
|---|---|---|
| Taxable Income (no pension) | €79,891 | €117,700 |
| Income Tax | €20,406 | €34,930 |
| Tax Credits | €3,550 | €3,750 |
| USC | €2,894 | €5,976 |
| PRSI. | €3,196 | €4,826 |
| Net Tax Liability | €26,496 | €45,731 |
| Balancing Tax | €26,496 | €47,757 |
| Preliminary Tax | €26,496 | €47,757 |
| Pension Contribution | - | - |
| Total Cash Outlay (No Pension) | €52,992 | €95,514 |
| Cash Saving (No Pension) | (€4,560) more expensive | 14,228 saving |
Without pensions, the farmer pays more tax in cash and loses out on long-term savings. The tax on higher-rate income has a major impact. The farmer in this case did make a pension contribution in 2024 and intends to continue in 2025.
Planning ahead – 2024 and 2025
With 2025 profits expected to increase again, farmers must:
Finalise 2024 accounts before autumn
Choose the right preliminary tax basis
Budget realistically for tax + pension cash outflows
Decide if their structure is still fit for purpose
Preliminary Tax – Options for 2025
Sole traders can choose one of the following options for preliminary tax:
90% of actual 2025 tax liability (requires accurate estimates by Oct/Nov)
100% of 2024 liability
105% of 2023 liability (via 3 monthly direct debits the first year and 8 monthly instalments for each subsequent year).
For this farmer, if 2025 profits fall, they may choose the 90% route based on draft accounts. If they opt for the 105% method.
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Advice for all farmers
Draft your 2024 accounts now — don’t wait until October
If using 105% of 2023, set up the direct debit early
Review all tax credits, reliefs, and expenses (stock relief, motor, ESB, medical)
Talk to your advisor about pension planning – it’s not just tax relief, it’s your future income
Consider income averaging or incorporation if profits are rising over multiple years
Watch out for large preliminary tax demands — make sure you're not overpaying