Capital Gains Tax climbdown

Alistair Darling has announced a further and significant climbdown on his controversial Capital Gains Tax (CGT) reforms.

Entrepreneurs will now pay a 10% rate of tax on capital gains up to £1m.

But taper relief is still to be scrapped and the set rate of 18% will be in place for all capital gains when selling a business after the first £1m.

The Federation of Small Business (FSB) has welcomed the Government's changes - but warned that small businesses' trust in the Government has been damaged by the original proposals and the uncertainty over revisions to them.

John Wright, FSB National Chairman, said: "The Chancellor said specifically today that he wanted to help small businesses facing big tax rises from April and that is very good news indeed."

"the entrepreneurs' relief he announced today is close to the proposals we put forward at the end of last year. They will go some way to protecting entrepreneurship in the UK as well as benefiting small business owners planning to pay for their retirement with the sale of their businesses."

Darling has been heavily criticised by the Conservatives and business trade bodies for the changes that could, in some cases, equate to an 80% increase in tax for people selling their businesses.

The changes were first announced in Darling's pre-budget statement last October.

The Federation of Small Business has declared the whole episode a mess and, with the help of the Institute of Directors and the Confederation of British Industry, applied sustained pressure on the Chancellor to reform the plans.