The budget brought a pleasant surprise in that the Annual Investment Allowance (AIA) is doubled from £50,000 to £100,000 from next month and there is currently no expiry date. This means that businesses can write off 100% of qualifying expenditure up to £100,000 each year against taxable profits. Whilst this is good news, whether it encourages capital investment remains to be seen as few businesses are able to utilise the current £50,000 AIA due to cash restraints. This headline grabbing statement may actually have little benefit to small businesses.

However, there is little bad news for small businesses:

• VAT rates remain the same. Registration & deregistration thresholds increase from 1 April to £70,000 and £68,000 respectively.

• No change in corporation tax rates. The main rate will continue at 28% for 2011/12. The small profits rate is still due to increase from 21% to 22% from 1 April 2011 if the 2009 Pre-Budget Report proposal is carried through.

• There are no changes to the the Business Support Service so business should still be able to defer their tax payments for the next year - but expect more rigorous questioning!

• Business rate taxes for small businesses will be reduced for one year starting from October 2010. This will impact on 345,000 businesses who may get a business rate tax holiday.

• The chancellor confirmed the basic rate of income tax will be 20%, the higher rate will be 40% and the additional rate will be 50%. Personal allowances will remain at their existing amounts.

• Entrepreneuer's lifetime limits are to be raised to £2m (from £1m) on which they will pay just 10% capital gains tax, instead of the main rate of 18%.

• The inheritance tax threshold will be frozen for four years at £325,000

As this budget is announced before a General Election, some of these changes may be overturned after the election - wait and see.

If you would like more information or tailored advice for your business, please get in touch. We offer a free initial consultation and would be able to advise based on your specific circumstances. You can also sign up for our free informative start-up business guide and regular tax tips through our website www.accountancyoffice.co.uk.

Sarah Sallis
Chartered Management Accountant
The Accountancy Office Limited
e-mail: hello@accountancyoffice.co.uk

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