'I'm not going to hide hard choices from the British people or bury them in the small print of the Budget document… Yes it is tough, but it is also fair' said Chancellor George Osborne announcing his ‘Programme for Government’, which included elements from the manifestos of both parties in the coalition government as well as numerous compromises and some new policies.

Billed as a 'tough but fair' Budget, the Chancellor’s plans to tackle the UK's record deficit while sustaining the economy contained lots of bad news but also some encouraging help for owner-managed businesses such as yours. Some of the measures included were:

An increase in VAT from 17.5% to 20% with effect from 4 January 2011
An increase in Capital gains tax from 18% to 28% for higher rate taxpayers, from 23 June 2010
A reduction in the Corporation tax rate for large companies from 28% to 27% on 1 April 2011, followed by reductions of 1% a year thereafter until it reaches 24% in 2014
Corporation tax for small companies reduced from 21% to 20% from April 2011
The threshold for employer national insurance contributions will be increased by £21 a week above inflation.
New businesses outside London, the East and the South East of England will enjoy a national insurance 'holiday' of up to £5,000 for the first 10 employees
Changes to the welfare system with cuts in Child Tax Credit for households with income over £40,000, new limits on housing benefit and a freeze in Child Benefit
Increase in the basic personal income tax allowance from £6,475 to £7,475 next April
A bank levy to generate an estimated £2 billion of revenue each year
10. £6.2 billion of cuts to ‘waste and low value programmes.’

The standard rate of VAT will increase to 20% on 4 January 2011. There are no changes to the Cash Accounting or Annual Accounting Schemes. Anti-avoidance legislation will prevent the 17.5% rate applying to supplies of goods or services that are provided on or after 4 January 2011, subject to certain conditions.

As a consequence of the increase of the standard rate of VAT from 17.5% to 20%, the flat rate scheme sector flat rates have also been recalculated to reflect the increase. The VAT flat rate scheme was introduced in 2002 with the objective of simplifying VAT for businesses with an annual turnover up to £150,000, tax exclusive. That threshold remains unchanged.

Details of all the latest tax rates and allowances can be found on our website  

The Chancellor announced that the basic rate band for 2011/12 will be reduced so that higher rate taxpayers do not benefit from the increase in the personal allowance. The exact figure will be announced later.

The Chancellor has announced a deferral, from the proposed date in 2011, of the implementation of Managed Payment Plans (MPPs).

MPPs will allow taxpayers to pay self-assessed income tax and corporation tax in a series of monthly payments either side of the theoretical due date.

Entrepreneurs’ Relief has until now reduced the effective rate of CGT charged on certain qualifying gains to 10%, subject to a lifetime limit. Whilst this rate has not changed, the lifetime limit was increased from £2 million to £5million for gains arising on or after 23 June 2010.

The IHT threshold is frozen at £325,000 from 2010/11 to 2014/15.

The rate of IHT remains 20% for lifetime transfers and 40% for death estates (including transfers within seven years before death brought back into the estate for the purpose of calculating the tax due at death).

The rates of writing down allowances (WDAs) for new and unrelieved expenditure on plant and machinery will be reduced from 20% to 18% per annum for expenditure allocated to the main rate pool, and from 10% to 8% per annum for expenditure allocated to the special rate pool. This will have effect for chargeable periods ending on or after 1 April 2012 for businesses within the charge to corporation tax and on or after 6 April 2012 for businesses within the charge to income tax.

The Annual Investment Allowance (AIA) will be reduced from the current limit of £100,000 to a new limit of £25,000. This will have effect from April 2012.

A new Enterprise Capital Fund of £37.5 million will be introduced to provide additional equity finance for small businesses.

The Enterprise Finance Guarantee will be increased to provide £200 million in additional lending for small businesses until 31 March 2011.

From 1 October 2010 the main adult rate of the NMW will rise to £5.93 per hour. Currently, those aged 22 and over are entitled to a minimum hourly rate of £5.80. With effect from 1 October 2010, 21 year olds will also be included in this rate.

In addition, apprentices will become entitled to a minimum wage rate for the first time in October. The new wage will apply to apprentices who are under the age of 19, or those aged 19 and over who are in the first year of their apprenticeship.

The current and future NMW rates are set out in the table below.

*Main rate applies to those aged 21 and over from 1 October 2010

As previously announced, from April 2011 rates will rise by 1% to:

The March Budget raised the employees' earnings threshold and lower profit limits. The Emergency Budget announced a rise in the employers' earnings threshold of £21 a week above indexation, and a reduction in the upper earnings limit to maintain the alignment with the basic rate income tax limit.

The Government is to consult on changes to the rules for foreign branches, taxation of intellectual property and research and development (R&D) tax credits provided for innovation.

It also intends to simplify the capital gains rules for groups of companies and in the autumn will set out a programme for the reform of the whole corporate tax system.

The Government has announced its intention ‘to restore the UK tax system’s reputation for predictability, stability and simplicity’ and has published a discussion document setting out a number of proposals including its intention to create an independent Office of Tax Simplification.

The Government proposes cancelling the introduction of the high income excess relief charge, which would apply from 6 April 2011, and replacing it, principally, with a reduced annual allowance as a means to restrict pensions tax relief.

The requirement to buy an annuity by age 75 is to end, with effect from 2011/12. In the interim, the age by which an annuity must be bought or an income secured is increased, with effect from 22 June 2010, to 77, so long as the individual had not reached the age of 75 before 22 June 2010. The same changes will also apply for inheritance tax (IHT) purposes to members who die on or after 22 June 2010.

The annual exempt amount remains at £10,100 for 2010/11.

For gains arising up to and including 22 June 2010, the rate of CGT is 18%. For gains arising on or after 23 June 2010 the rate remains 18% for those whose total taxable income and gains are less than the income tax basic rate upper limit. For gains, including parts of gains, above that limit, the rate is 28%. Gains arising before 23 June 2010 are not taken into account in determining the rate (or rates) at which gains arising on or after 23 June will be charged.

The Chancellor announced that the proposed withdrawal of the FHL rules from 6 April 2010 will not take effect.

A consultation will take place over the summer of 2010 about plans to change the tax rules for FHL from April 2011. The consultation will specifically look at:

Ensuring the FHL rules apply equally to properties in the European Economic Area (EEA)
Increasing the number of days that qualifying properties have to be available for, and actually let as, commercial holiday letting; and
• Changing the way in which FHL loss relief is given.