Capital Gains Tax Valuation
Introduction: What is Capital Gains Tax?
Capital Gains Tax is a payment charged by HMRC on any profit you make when you sell a valuable item. The most common examples of items on which Capital Gains Tax may be applicable are stocks, precious metals and property. When you are in the process of making a sale of such items, especially property, it is essential that you arrive at the correct valuation for tax purposes. In these circumstances, it is advisable to use the services of a registered valuer with experience of delivering evaluation reports for Capital Gains Tax purposes. You may also be liable for Capital Gains Tax if you are transferring ownership, exchanging property in a swap, or gifting your property or land to another person.
How Capital Gains Tax is applied and calculated
Capital Gains Tax was introduced in the UK in 1965 in response to a growing tendency by property developers to leave buildings unused while their worth rose. Property values had grown quickly in the years since the Second World War. UK residents who are on the basic tax rate are subject to Capital Gains Tax of 18 per cent on any profits from the sale of residential property, and 10 per cent on the proceeds of selling any other chargeable assets. If you are a higher-rate taxpayer, the rate is 28 per cent on residential property profits, and 20 per cent on all other goods sold. Every individual has a Capital Gains Tax allowance, a threshold below which you are exempt from paying tax. For the 2021-22 tax year, this figure in the UK was £12,300.
Exemptions from Capital Gains Tax
There are some significant exemptions from Capital Gains Tax, which include the sale of your principal private residence.
HMRC states clearly that you will not be liable for Capital Gains Tax if all of the following conditions apply:
- You have only one home and it has been your main residence while you have owned it.
- You have not let out any part of it – that does not include having a lodger.
- You have not used a part of your home exclusively for business purposes. Using a room as a temporary or occasional office does not count as exclusive business use.
- The grounds, including all buildings, total less than 5,000 square metres in area.
- You did not buy it simply to make a profit.
If all of these conditions apply, you will automatically qualify for Private Residence Relief and will not have to pay any tax.
Commercial Valuation for Capital Gains Tax
If you are selling a business property, you will require a commercial valuation for Capital Gains Tax. It is highly advisable that you engage a chartered surveyor and registered valuer who can deliver an authoritative and trustworthy valuation of the property in question. This will lead to a far smoother process because HMRC is much more likely to trust the valuation submitted by an experienced and respected professional in this field.
House Valuation for Capital Gains Tax
This is an important consideration when you are disposing of a residential property that is not your main home and for which you are, therefore, liable to pay tax. You will need an accurate house valuation for Capital Gains Tax if you sell your second home, investment property or buy-to-let residence. You will also require a house valuation for Capital Gains Tax in the UK if you are proposing to transfer the ownership of such a property to another person or to pass it to someone as a gift. Whether you are selling, or transferring the ownership in some way of, a commercial or residential property, if your total gain is less than your tax-free allowance you will still need to report your profit in your tax return if both of the following apply:
- The total amount you sell the assets for is more than four times your allowance.
- You are registered for self-assessment.
Appointing a Professional Valuer
Ultimately, it is essential that any house valuation for Capital Gains Tax – indeed, any valuation of this nature – is accurate and trustworthy. Using a chartered surveyor and registered valuer to arrive at the correct valuation of your property is a wise move.
It is worth considering that HMRC is far more likely to investigate any tax submission that has not been prepared by a qualified professional. If a professional property valuer has carried out such a valuation, HMRC normally accepts it without a challenge. Copping Joyce Surveyors has all the expertise required to carry out comprehensive valuations for tax purposes. We include detailed descriptions, photographs and our methodology to help HMRC to accept the figures recorded – and make the process as smooth as it can be. We can also assist with historical market value evaluation reports for Capital Gains Tax if the assets have been sold for less than they were worth to help the buyer, or if the assets have been inherited and you do not know the Inheritance Tax value.
Frequently Asked Questions
A payment due to HMRC that represents a proportion of the profit made on the sale, or other transfer of ownership, of valuable items such as property, stocks and precious metals.
An accurate valuation of the items in question is key to this process. A house valuation for Capital Gains Tax purposes must be accurate and trustworthy if you are to arrive at the correct legal amount of tax that must be paid.
No, you may have to pay tax on the sale or transfer of business premises and their contents. You will need a commercial valuation for Capital Gains Tax for this purpose.
At Copping Joyce Solicitors, we can help in cases where the sale of the property was well in the past. We can also assist if the property in question was inherited as part of someone’s estate and you do not know how much Inheritance Tax the beneficiaries had to pay.
We will carry out an inspection of the property concerned and, using our expertise in the subject and in local market conditions, report on the value of the property. We can negotiate with HMRC if any queries arise, but please be aware that this can mean additional costs.