Many measures in the Chancellor’s Budget on 24 March survived the dissolution of Parliament and became law before the general election. Smaller businesses and their owners are both winners and losers from the changes in the Finance Act, which became law on 8 April.

Business-friendly changes

• The annual investment allowance for capital expenditure on plant and machinery has doubled to £100,000.
• Entrepreneurs’ relief for individuals selling their business or certain business assets has doubled. This means that up to  £2 million of capital gains during a person’s lifetime can currently be taxed at the lower rate of 10% rather than the normal rate of 18% (now likely to increase).
• The ‘Time to Pay’ scheme for businesses in financial difficulties has been extended over the life of the next Parliament.

Not so business-friendly

• The new 50% income tax rate took effect on 6 April for individuals with taxable income above £150,000.
  
• The national insurance rises for employers, employees and the self- employed from 6 April 2011 are unlikely to go ahead as planned. The Conservatives are reported to have agreed with the Liberal Democrats on a partial reversal of the measure for employers.
  
• The restriction in tax relief for pension contributions made by people with incomes of at least £130,000 (£150,000 including contributions) is still due to go ahead on 6 April 2011.

Other measures

• From 6 April 2011, there will be a 5% rate of stamp duty land tax on properties costing £1 million and more.
• All personal allowances were frozen at their 2009/10 levels, including the basic  £6,475 allowance that is available to most taxpayers aged under 65.
• In 2010/11, the basic personal allowance of £6,475 will be progressively withdrawn down to nil for people with a total income above £100,000. As a result of this, the effective marginal tax rate for a person on income between £100,000 and £112,950 is 60%.
  
• Except for the new top rates of 50% tax and 42.5% dividends, there is no change in income tax rates or to the rate bands.
• The nil rate threshold for inheritance tax will be frozen at £325,000 until 2014/15.
• Where taxpayers do not disclose their taxable income or gains and there is an offshore aspect to this tax evasion, such as an offshore bank account, HMRC will be able to charge penalties of up to 200% of the tax lost.

The tax changes introduced in the March Budget and the pre-election Finance Act seem likely to survive under the new Government. The next Budget, due by late June, may contain more surprises than March’s, including some unwelcome new tax changes. After all, the Treasury has forecast a £163 billion deficit for the current year .