Bosses of more than 10,400 small businesses are facing two tax increases in just 12 months following Chancellor Alistair Darling's first Budget last week.

The first hit will strike home next month when the Corporation Tax rate for small firms rises from 20 per cent to 21 per cent.

That will leave Peterborough businesses with an additional total tax burden of some £5 million.

The second strike will come just 12 months later when the Corporation Tax rate for small firms will rise by another one per cent to 22 per cent – meaning another £5 million tax hit for city firms – an average of £500 per company.

The figures have been calculated by Peterborough accountants Saffery Champness on behalf of ET Business.

Partner in the Peterborough office of Saffery Champness Jane Hill said: "I think this is the worst it has ever been for small firms.
"Over the last few years small firms have received extra help but suddenly, and in one fell swoop, it has all gone."

Mrs Hill added: "The forthcoming increase in the tax rate for small businesses is bad news for the local economy, as many Peterborough businesses fall into the 'small business' category."

She warned: "But the impact will not be limited to business owners.
"Those employed by small businesses will find that there is less money available for salaries and benefits in their organisations. Of course, with less money to go around, local retailers could also feel the pinch."

Managing director of BusinessWatch, in Bakewell Road, Orton Southgate, Peterborough, Jonathan Wakerley, who won the ET Business awards Small Business of the Year title last year, said: "It is hard enough doing business without having an additional tax burden.

"I think it is pretty unfair on businesses in Peterborough. The end result is likely to be that the costs paid by the consumer will have to rise."

Director of KJS Print to Mail Services, in Padholme Road East, Peterborough Stuart Speechley said: "It is another blow for small firms. I don't know how the Government expects business to keep on going.

"I think small firms are just seen as easy targets. We can't shout back and so we just have to get on with it."

Chief executive of Peterborough Chamber of Commerce John Bridge said: "We know that the tax burden on business is increasing on small firms yet they are the lifeblood of the economy and are having to pay for this Government's ineptitude.

"It was a bad Budget for business and at a time when the economy is becoming challenging the last thing companies want is for the tax burden to be increased."

Peterborough branch chairman of the Federation of Small Businesses Colin Parnell, who is also a director of File Flatners, in Fengate, said: "It is outrageous that taxation for small firms should be increased and yet it is lowered for larger companies.

"Small firms need help not extra taxation. I think our size just makes us an easy target for Government."

Both tax increases were first flagged up by Gordon Brown in his last budget as Chancellor, when he also raised the rate from 19 per cent to 20 per cent. The two pending increases were confirmed by Chancellor Darling last week.

Yet the increases for small firms are in stark contrast to that for larger firms which will see the rate of Corporation Tax cut from 30 per cent to 28 per cent.


Not all doom and gloom

Partner in the Peterborough office of chartered accountants Saffery Champness Jane Hill said the Budget was not all doom and gloom.

She said: "The saving grace for many small businesses will be the Annual Investment Allowance, which provides a 100 per cent claim for capital expenditure up to £50,000. This is, however, an advance of allowances that would be claimable at a later date, leaving many with lower allowances available to claim in future years.

"Many local businesses could benefit from Mr Darling's stated goal of awarding 30 per cent of government contracts to small businesses. Local companies struggling to raise money from increasingly cautious banks will also take comfort from the Chancellor's pledge to increase Small Firms Loans Guarantee funds by 20 per cent."