The government has announced a partial revision of its controversial capital gains tax proposals, which will go some way to protecting small business owners.

The 18% flat rate will still come into force from April 6 but small business owners will be able to exercise a one-off allowance which will see up to £1m taxed at 10%.

The move will help entrepreneurs who have focused their efforts on just one company but will still hit serial entrepreneurs and investors in multiple small businesses.

The Federation of Small Businesses welcomed chancellor Alistair Darling's amended proposals, although it warned that small businesses' trust in the government had been eroded as a result of the uncertainty since the initial announcement in last year's pre-Budget report.

"The entrepreneurs' relief is close to the proposals we put forward at the end of last year," said John Wright, FSB national chairman. "They will go some way to protecting entrepreneurship in the UK as well as benefiting small business owners planning to pay for their retirement."

But tax consultancy Grant Thornton warned that the move would still leave many entrepreneurs rushing to sell their business in the next three months.

"Many now face the prospect of hurrying through a sale of assets in a matter of weeks to take advantage of taper relief and the indexation allowance before it disappears for ever," said Francesca Lagerberg, head of national tax.