How will the budget affect my business?

Unless you are a cider drinker not much, says accountant James Banham.

Ask the Experts

I am a small business owner. How does the 2010 Budget affect me?

The accountant

James Banham, partner at Banham Graham

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The answer depends on whether you are a cider drinker! If you are, the budget announcements mean that you will pay an extra 10pc of duty on your tipple of choice.

For non-cider drinkers, the changes announced in this year's pre-election budget are unlikely to lead to a lack of sleep.

Alistair Darling pitched this year's budget as helping the UK to continue its post-recession recovery and there were no real surprises. Beneficial measures for business were announced but unfortunately for many, they will have more of an impact on larger businesses than small ones.

The first change I'd like to draw your attention to is the increase in the annual investment allowance. Broadly speaking, the AIA allows a full deduction from taxable profits in the year of purchase on purchases of plant and machinery used in your business.

In other words, if you have profits of �100,000 but have purchased �40,000 of equipment in the year, you will only be taxed on �60,000 with no fiddling around with first-year allowances or asset pools.

This allowance has been increased from �50,000 to �100,000, which will be advantageous for some.

However, if your business struggled to reach the �50,000 limit last year, the change is unlikely to affect you unless you are planning a large capital expenditure project.

If you are planning to purchase an asset that costs more than �50,000 it would be worth speaking to a tax adviser to ensure that you get the full relief.

The second important change is the increase in the lifetime limit for entrepreneurs' relief, which has doubled to �2m.

Qualifying for entrepreneurs' relief means that you pay an effective rate of 10pc capital gains tax on the sale of the whole or part of a business or company up to the limit of �2m (provided you meet the required conditions).

Again, increasing the limit from �1m to �2m is unlikely to have a significant impact on disposals by small business owners.

On a more positive note, Mr Darling also promised that by the end of 2011 we can expect a better online service from Her Majesty's Revenue & Customs, allowing SMEs a single view of their current tax liabilities or repayments.

This should make dealing with HMRC more convenient and less stressful: a step in the right direction.

To sum up, whilst there were some small concessions, the budget did not bring any significant changes, positive or negative. Unless of course, you drink cider!

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