Mixed messages for entrepreneurs

In his second budget report, the Chancellor of the Exchequer focused on business growth, providing numerous incentives for budding entrepreneurs as well as more established businesses.

Yet along with these incentives came the announcement of a number of deadlines, meaning that the opportunities to take advantage of improved tax relief and capital allowances will not be available for long.

21 Enterprise zones are to be created, the first in Leeds, Liverpool, Solihull, Birmingham, Greater Manchester, The Tees Valley, Derbyshire, the Bristol area, the Black Country, Tyneside, Nottinghamshire, and Sheffield. It is these zones that will be entitled to enhanced capital allowances as well as other benefits including discounted business rates and access to ‘superfast’ broadband.

There will also be additional support for entrepreneurs across the UK, due to the recent doubling of the Entrepreneur’s Relief (ER) lifetime allowance. This unexpected bonus means that over all, the lifetime allowance has been raised from £1m to £10m in just one year.

Concurrently though, the Chancellor plans to reduce capital allowances rates, most notably the Annual Investment Allowance, which will drop from £100,000 in 2008 to just £25,000 from April 2012.

All in all, whilst most of the proposed changes will mean benefits to entrepreneurs and businesses alike, the fall in Annual Investment Allowance could slash profits for many over the next two years, suggesting that the best time to take advantage of tax claims is now.

This article was written by Katie-Jill Rowland

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