Now is an appropriate time to for farmers to take stock of their current finances
Omagh-based accountant Seamus McCaffrey is confirming that the autumn is an extremely critical period of the financial year for all agricultural businesses.
He explained: “Now is the time for farmers to review their current cash flow status and to project how this might change over the coming months.
“The end of January is that all important time of the year when tax has to be paid. This is less than four months off.
“And the required preparations to allow businesses meet this requirement in the most effective way possible should be started now.
“Seeking the proper advice from one’s accountant is strongly advised in this regard.”
The accountant confirmed that all input costs impacting on farm businesses - especially, fuel fertiliser, repairs, machinery and labour - have all increased dramatically over the past 12 months.
Significantly, the Andersons Centre estimates that agricultural input inflation ('Agflation') reached 7.8% in the year to September past, up from 7.2% in August and 1.7% in January.
This is the highest rate since early 2023 and more than double headline consumer price inflation, which stood at 3.1% in August.
The rise is being driven by the most volatile items in the farm cost base. Fertiliser prices are estimated to be around 35% higher than a year ago, while energy and lubricants are up by over a quarter, reflecting the impact of conflict on global energy and fertiliser markets.
Contractor charges (up 11%) and wages (up 5%) are adding further pressure, while feed prices have risen more modestly at around 3%. The squeeze is being felt on both sides of the ledger.
Meanwhile, agricultural output prices are estimated to be 1.3% lower than in September 2025, meaning the gap between what farmers pay and what they receive has widened to more than nine percentage points.
Overall, farm input costs now sit around 40% above 2020 levels. With budgets for the 2027 season now being set, understanding and planning for these cost pressures has rarely been more important.
Farmers are used to handling cost increase, provided their farm gate returns fully reflect this pressure.
But this is not happening at the present time. Retail food prices have remained stubbornly at a level well below farm production costs for many months.
Seamus McCaffrey again: “Despite these pressures, it is important that farm businesses have good working relationships with all their suppliers.
“Paying bills promptly is key to all of this. If this is not achieved, the interest placed by suppliers on outstanding accounts simply adds more pressure to the finances of a faming business.”
In cases of short-term cash flow pressure, farmers can approach their bank to seek additional finance. Options here include increased overdraft facilities and/or short term loans.
“This entire process hinges on farm businesses having compiled accurate cash flow projections before sting down with the bank manager,” said McCaffrey
“And again accountants can play an important role in this regard.”
He continued: Tax bills accruing next January will reflect the strength of profits made by farming businesses in the 2025/26 tax year.
“All farm commodity prices remained exceptionally strong throughout 2025.
“So, we are looking at a scenario which sees farm businesses making payments to the HMRC at a time when cash flow is coming under severe pressure.”
One way of mitigating this scenario for sole traders and partnerships is to secure a profit averaging arrangement with Revenue and Customs.
Another option when it comes to decreasing the cash flow pressure caused by a large tax bill is to secure a ‘time-to-pay’ arrangement with Revenue and Customs.
This is a formal agreement that allows individuals and small businesses to pay tax in monthly instalments over a period agreed with HMRC. In order to avail of the Time to Pay arrangement, all tax returns must be filed on time.
“Interest will be paid on all monies outstanding.”
The Omagh-based accountant further explained: “Requesting assistance from HMRC when it comes to paying tax bill does not expose taxpayers to the enhanced possibility of a tax inspection.
“In fact, the polar opposite may well be the case.
“This is because the measures will only be agreed to in the case of taxpayers who regularly submit their Returns on time and have a strong track record of settling their tax affairs in an orderly fashion.”
McCaffrey concluded: “A third way of mitigating direct tax pressure is for a farm business to make a contribution to a private pension plan.
“Taking this approach will also have important benefits when it comes to the issue of transition within a farm business.”