Chancellor Alistair Darling has confirmed capital gains will be taxed at an 18 per cent rate as of 6 April.

In his first Budget speech delivered to the House of Commons, Darling says while the capital gains tax (CGT) rate will be a flat 18 per cent, tax for the first £1m of gains on business assets will be ten per cent.

Under the government’s proposal, taper relief has been abolished, while individuals will continue to see a £9,200 annual exemption.

Commenting on the CGT reforms announced in today's Budget, Kate Syred, head of Direct Line for Business said: ‘While it is disappointing to see the abolition of an effective taper relief system for a controversial single flat rate, the government's response to the concerns of the small business community with the introduction of the 'entrepreneur relief' is a step in the right direction.

‘The ten per cent tax rate on gains up to £1 million should hopefully provide some means of protecting Britain's small businesses and encouraging entrepreneurialism among aspiring business owners.’

The reforms have, however, caused much confusion and uncertainty within the small business community, and businesses with gains over £1 million wanting to sell up and lock in ten per cent before April have been given a very short timeframe to do so.

Syred says, ‘Direct Line for Business' research among over 600 small business owners found that 34 per cent of small business owners admitted they were not aware of the proposed changes following the pre-Budget announcement in November 2007, and 26 per cent did not understand what it meant for them. Changing regulation and legislation worries over a quarter (28 per cent) of small business owners, so it is important such changes are communicated effectively.’

Also from April, the basic rate of income tax will fall from 22 pence to 20 pence in the pound, but this will be almost entirely offset by the abolition of the 10 pence starter rate of income tax.

Martyn Laverick, Marketing Director, AWD Chase de Vere, says, ‘Scrapping the 10p tax rate and reducing the base rate by 2p has done next to nothing to increase people’s take-home pay – but it has reduced the amount of tax relief they’ll get on their pension savings. The Chancellor was happy to maintain higher level tax relief on gifts for charities – so why not for pensions?’