Budget 2010: CGT relief doubled for entrepreneurs

Alistair Darling has doubled the entrepreneurial relief for capital gains tax (CGT) in a bid to make it more attractive for what he called "wealth creators and innovators" to set up their own businesses.

The Chancellor also confirmed he will not increase CGT from its current rate of 18%.

CGT relief, which allows entrepreneur's to pay just 10% tax on their first £1m of capital gains, will double to a £2m threshold.

Darling says the measure will help encourage innovation and small business investment in the UK.

Many analysts had expected CGT would be increased to the rate of income tax, as it currently enables the wealthy to pay less tax by receiving shares instead of income.

CGT relief was one of a series of measures Darling announced in a bid to "make sure the tax system does not hold back decisions to invest during the economic recovery".

"Scrapping investment allowances, as some have proposed, in order to pay for a reduction in the overall rate of corporation tax makes no sense," he said.

He announced he would help small businesses expand by doubling the annual investment allowance to £100,000.

As a result, Darling said, 99% of businesses will be able to deduct in the first year, from their taxable profits, all investments in plant and machinery.