The Chancellor Alistair Darling (pictured) has unveiled plans to allow local government to charge supplementary business rates and changes to capital gains tax.

The plans, set out in his pre-Budget report, will hit businesses – the less-generous capital gains tax will mean entrepreneurs and small businesses will pay more tax if they sell up.

John Walker, the policy chairman at the Federation of Small Businesses, told the BBC: "Alistair Darling's first pre-Budget report was a disappointing one. The UK's small business community, which contributes over half of the country's GDP, will not be helped by increased business rates and a less generous capital gains scheme."

However, business groups welcomed news of a simplified tax system to benefit small businesses and the self employed, which the chancellor said could save up to £1m a year.

Darling confirmed that the main rate of corporation tax would be cut by 2p to 28p in the pound from next April, as previously announced in the Budget in March this year.

Meanwhile, private equity heads have warned the Chancellor that hitting the industry in the pre-Budget report will force them to invest less in the UK.

A survey by Grant Thornton found that increasing the capital gains tax base, which private equity players often benefit from, would hit staff retention (49%) and make recruitment more difficult (50%).