Britain’s service industry, including hairdressers and shopkeepers, are some of the biggest losers from Gordon Brown’s surprise tax rise on small business.

People with small businesses with annual profits of less than £300,000 were left fuming by Wednesday’s Budget, which imposed a 3 per cent increase in their income tax over the next two years to 22 per cent.

However a Times survey of shop owners, tax experts and industry associations has revealed that some will be even worse off than others.

The bulk of Britain’s 35,000 hairdressers will be among the hardest hit, as they will suffer the tax hike but will not be eligible for relief such as the extension on capital allowances.

The Government has sought to justify the tax increase by pointing to new incentives for investment; an extension to the first-year capital allowance of 50 per cent and 100 per cent concessions for investment in equipment worth up to £50,000. For the service industry, however, such investment is rare.

Claudio Contrasti, who has owned a London salon for the past four years and employs nine people, spent £5,000 a year replacing tools and materials. He said: “The little profit that we try to make is going to be less from now on — it will be very harsh for us.”

Stephen Alambritis from the Federation of Small Businesses said that the changes had shocked business owners. He said: “They have come completely out of left field.”

Times Recommends

• Millions enter fuel poverty as energy costs soar
• High street sales stage surprise July upturn
• Persimmon says housing market will not worsen