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.

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)20232024
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 Pensions20232024
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?20232024
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 expensive14,228 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:

  1. 90% of actual 2025 tax liability (requires accurate estimates by Oct/Nov)

  2. 100% of 2024 liability

  3. 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.

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

Marty Murphy

Talk to Marty Murphy

Head of Tax1800 33 44 22martymurphy@ifac.ieLinkedin

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