Although the emergency Budget delivered on Tuesday by Con-Dem Chancellor, George Osborne has received mixed reviews, the general consensus among the small business community appears to be that the picture going forward is a positive one.

Although VAT is set to increase from January 2011, to 20% (from 17.5% currently), and capital gains tax for higher rate taxpayers was increased to 28%, effective from midnight on budget day, many are viewing the latter change as not as bad as it could have been; a 50% rate was previously discussed. Additionally, capital gains from entrepreneurial activity face a reduced 10% rate on the first GBP5mn, up from GBP2mn currently.

The Chancellor confirmed that corporate tax will be reduced by 4% to 24% in 1% increments over the course of the next four years, and that the small business corporate tax rate will be reduced from 21% to 20% in 2011.

In addition, in order to stimulate the establishment of new businesses in economically depressed areas of the UK, Osborne revealed that anyone setting up outside of London and the South East can benefit from national insurance exemptions of GBP5,000 for each of the first ten employees that they hire. He also flagged up increases to the Enterprise Finance Guarantee and the creation of a new Enterprise Capital Fund.

Responding to the budget on Tuesday, the Federation of Small Businesses (FSB) welcomed many of the measures, but expressed concern that rises in Employer National Insurance Contributions (NICS) had not been completely reversed.

It stated that:

"The FSB is pleased that the Treasury has listened to concerns about hiking Capital Gains Tax to 50%, and has chosen instead to increase it to 28% for those on the highest incomes. The FSB welcomes moves to increase the Entrepreneurs Relief threshold to GBP5 million from GBP2 million. This relief was called for by the FSB under the previous administration."

And continued:

"The move to reduce the Small Companies Tax Rate to 20% is welcomed and will help over 850,000 small firms. The FSB is also delighted that the Government will extend the Enterprise Finance Guarantee which was introduced following calls from the FSB and helps many small businesses who face difficulty in accessing credit."

However, the Federation went on to add that it "welcomes the proposals to exempt new businesses from NICs but believes that this should also be extended to existing businesses, which have the capacity to employ people".

Regarding the VAT increase from January 4, 2011, the FSB warned that the move was likely to harm the prospects of small retail businesses, which are less able than their larger counterparts to absorb the cost.

It also slammed the proposal announced in the budget to increase Insurance Premium Tax (IPT) as a "tax on responsible business", arguing that many small businesses have no choice but to obtain insurance, and are therefore likely to suffer financially as a result of the hike.

John Walker, the Federation's National Chairman concluded by observing that:

"The measures announced in the Emergency Budget will go a long way to reducing the deficit and will please the 93% of FSB members who called for a clear plan on tackling the country's debt."

The Forum of Private Business (FPB) has also welcomed the majority of the measures in the budget affecting small businesses, singling out the small business corporate tax cut, the increasing of the entrepreneurs' relief threshold, the extension of the Enterprise Finance Guarantee, and ongoing tax breaks for holiday lets for special praise.

With regard to the capital gains tax increase, FPB Chief Executive, Phil Orford announced that:

"The rise in CGT had proved controversial with business owners ever since the idea was first put forward, but the 28% rate is a gentler increase than many people were expecting."

And commenting on the VAT increase, he added:

"Obviously, the VAT rise will have an impact on many smaller businesses, either directly or indirectly. However, the money to pay off the deficit has to come from somewhere and I expect most Forum members would rather stomach a VAT increase than a rise in other taxes, or even greater cuts in public spending."

He went on to reveal that the Forum welcomed the government's moves in the area of National Insurance, although he expressed disappointment that they had fallen short of what was promised by the Conservatives pre-election.