The window for capital gains tax planning is closing soon

Legal experts at national law firm Burges Salmon say that with only two months until the end of the current tax year the opportunity for some landowners to limit future CGT is receding.

The announcement last October of the increased CGT rate of 18 per cent and the abolition of the indexation allowance was expected to drive some land sellers to the market early in the hope of benefiting from the pre 6 April 2008 CGT regime.

Tom Hewitt, partner in the tax and trusts department at Burges Salmon said: "It has been surprising that more land owners have not chosen to sell or take other steps to minimise future tax before the April deadline.

"One of the reasons may be that at times over the last few months it has looked like the government might back down on the changes. It hasn't although the entrepreneurs' relief announced last week will soften the blow for some by limiting the rate of tax to the current 10% rate on future gains up to £1m.

"Even those landowners who have no plans to sell their land can look at ways in which to preserve the indexation allowance for the future. For some it may even be attractive to trigger a tax charge before April because the tax will not be payable until the end of January 2009. But they need to take advice now for there to be time to look at these issues."

Burges Salmon has seen cases where the tax will increase by 400% as a result of the increase in the rate of tax and the loss of indexation. Any landowner who had planned to sell in the near future based on the former CGT rules will now have to re-calculate their finances unless they fast-track the process to exchange before 6 April 2008.

The Chancellor announced last October in his Pre Budget Report that differing rates of CGT are set to be replaced from 6 April 2008 by just one at 18 per cent. At the same time the abolition of indexation relief means that the sale of assets which have been owned for many years (which is often the case with land) will realise a much larger capital gain. For many this will be a "double whammy" and the increased tax will be an unexpected burden.