Liz Gallagher, the senior tax manager at Trevor Jones Chartered Accountants said: “The Budget contained good and bad news for motor traders and those considering withdrawing from the sector,” she said.

“On the plus side the introduction of an Annual Investment Allowance for capital allowance purposes of 100 per cent on the first £50,000 per annum of qualifying expenditure on plant and machinery, is a positive move for those businesses which have been too large to qualify for first year capital allowances in the past,” she said.

“However, this is tempered by the delay in obtaining relief on other amounts, caused by the reduction in the general rate of writing down allowances from 25 per cent to 20 per cent and a new rate of 10 per cent on plant and machinery inherent in a building,” she said.

Business owners are also likely to find themselves out of pocket as a result of the new flat rate for capital gains tax.

“The picture is mixed for those considering disposing of assets, whether in the form of shares or land and buildings. From 6 April 2008 the gain will be taxed at 18 per cent, unless it qualifies for a 10 per cent entrepreneurs' relief, equal to a tax reduction of £80,000 if the maximum £1m lifetime gains allowance is utilised.

“This relief only partially compensates for the abolition of indexation allowance and taper relief and many people will find themselves worse off under the new rules.”