The Chancellor had been offering some strong hints that the Budget would include measures to help smaller firms in particular.
One of those measures was the decision to increase the threshold for the annual investment allowance. This doubles to £100,000 and covers qualifying expenditure made from 1 April 2010 (for corporation tax) or from 6 April 2010 (for income tax).
The allowance enables businesses, whatever their size, to reduce their taxable profits by the full amount they spend on most plant and machinery except cars. Any capital expenditure made above the new threshold will qualify for the standard capital allowances.
The scheme that allows entrepreneurs relief on capital gains tax also received a boost. The relief is to be extended from the first £1 million of gains made over a lifetime to £2 million, as from April 2010. This means that gains of £2 million will be taxed at 10 per cent rather than the main 18 per cent rate for CGT.
Small business rates have been a focus of lobbying by several business organisations recently. The Budget introduced a one-year increase in the level of rate relief available to smaller firms. As from October 2010, qualifying small businesses that occupy premises with rateable values up to £6,000 won’t pay any business rates for a year. Other small businesses that receive tapered rate relief on premises with values up to £12,000 should enjoy a cut in their rates’ bills too.
There are also changes to the tax on very low carbon company cars. From April 2010 and for five years, the tax payable on such cars is halved.
For other cars, the current table of company car tax bands will be drawn down to a new 10 per cent band and all CO2 emission thresholds will shift down by 5gm/km as from 6 April 2012. The 10 per cent band will apply to cars with emissions of up to 99gm/km.
The small company rate of corporation tax, as promised in the pre-Budget Report, is pegged at 21 per cent in 2010/11. The planned 1 per cent rise, to 22 per cent, has been held over for another year.
The temporary extension of trading loss carry back from one to three years, for losses up to £50,000, is to continue. It applies to losses in accounting periods ending between 24/11/08 and 23/11/10.
The fuel duty increase, planned for next month, is to be phased in three stages – 1p per litre on 1 April, followed by 1p per litre on 1 October and the remainder on 1 January 2011.
Not all the news was good though.
Despite pressure from the business community, employee, employer and self-employed national insurance contributions will rise, as planned, by 1 per cent in April 2011.